HCE with no comp

[SMB]

I seem to recall a somewhat related question that was raised in conjunction with a business owner's spouse who works for the business, but is not compensated - but I couldn't find the thread.

My situation: business owner worked all of 2011 - but took no compensation (it's an S Corp, but he had no "W-2 reportable" salary or wages). Question is: can this HCE be included for coverage and testing purposes (would be REALLY helpful), or must the HCE have actually received compensation to be so included?

In recent years, even when the HCE owner has received comp, he did not receive an employer contribution allocation. He's in "pre-retirement" mode and has all the $s he thinks he needs. His son (an employee) is the "up and coming" heir to the business and it would be significantly more "benecficial" for the son - contribution wise - if Dad receives a $0 allocation.

Any of this making ANY sense? Thanks for any and all input.

[chc93]

I've looked at this recently. Law firm with 3 lawyers (HCE's), one older lawyer that only worked on one case during the year, only went into the office a few months, no compensation. After researching, concluded that this lawyer would not be in any test (410b, 401a4). See the following thread...

http://benefitslink.com/boards/index.php?s...=28587&st=0

Go down to AndyH post #13. This quote by Jim Holland that "No compensation. Not an employee. Not in the test. ANY test" was also echoed elsewhere. Also, other links in this thread might be helpful.