Top Paid Group Former Owners

[Guest shm3803]

I have a plan that uses the top paid group election. Company was sold 12/10/2010. My understanding is that anyone who was an owner during 2010 would still be considered an HCE for 2011 even if they don't meet the top 20% compensation definition. Is that correct? Thanks!

[ETA Consulting LLC]

Correct. Notice that you said "the company" was sold as opposed to saying "the company sold it's assets". Anytime the company is sold (an equity or capital sale), then only the ownership changes but there is no severence of employment. (I know I stepped off topic a little). From your question, you merely had and ownership change during 2010, but the employer sponsoring the plan did not change; just the ownership of that employer.

Good Luck!

[Guest shm3803]

Thanks! If it was an asset sale, then they would not be HCEs?

[ETA Consulting LLC]

Thanks! If it was an asset sale, then they would not be HCEs?

Typically yes, but the answer is not as easy since it would require an additional analysis. Presumably, the new employer would've decided to take over the plan which would've kept employment, service, and compensation records for the plan in tact.

Fact patterns are very important when answering these types of questions (and books have been written to account for each fact pattern). There are always contengencies that can change an answer.