Is This Person a Key Employee

[sdix401k]

I have the situation below: I have determined this is an Affiliated Service Group.

Company A Company B
Employee 1 Employee 1
Employee 2 Employee 2
Employee 3 Employee 3

Employee 2 owns 0% of Company A and owns 10% of Company B. He is not an officer of company A and is not an employee of company B.

Because of required aggregation for Top Heavy is he a Key Employee?
I have seen in the regs that a person must be an employee to be a key and therefore he is not a key. I have also seen some language that says ownership will transfer to company A making him a key??

Thoughts?

[ETA Consulting LLC]

"IF" you are a key employee of a company, and that company is a member of an afiliated service group; then why wouldn't that employee be a key employee for plans sponsored in that group?

Good Luck!

[Lou S.]

He is a key of B, B is a member of the ASG, therefore he is a key of the ASG.

[sdix401k]

In response to ERISA TOOL KIT

I have read text that if a person is a shareholder and not an employee of the company than they are not a Key employee.

[Lou S.]

I missed that he is not an employee of B. Now I'm no longer sure.