Owner's divorce

[Cynchbeast]

We have a plan where one of the owners is in the process of a divorce and his wife - soon to be ex-wife - also works for the company.

Is there any point in the divorce proceedings short of the final divorce when the wife can cease to be considered HCE and Key? Or must we wait until the final divorce?

[ETA Consulting LLC]

You're a 5% owner for a year is you're a 5% owner for "any time during" that year.

For HCE purposes, you have a two year period for which a 5% owner would be an HCE. Hence, assuming a calendar year plan, the spouse would be an HCE until the plan year beginning January 1, 2015 (assuming the divorce is finalized in 2013).

For Top Heavy, she would be a Former Key Employee in the following year (2014).

Good Luck!

[Cynchbeast]

Good points. Thank you very much for your response.