Counting "treasury stock" re: HCE determination

[AlbanyConsultant]

Hi. I have a situation where the company sponsoring a plan has purchased back 5% of the outstanding stock and is holding it (as "treasury stock"). Does that affect the percentage owned for the other owners?

Example: 100 shares in total, 5 purchased and held by the company. Does an individual who owns 5 shares count as 5/100 and therefore not a "5% owner", or is it 5 / 95 outstanding shares, which is > 5%? Or even 5 plus their share of the treasury stock (so 5 + (5/100), which still puts him in to "5% owner" territory)?

Thanks.

[Griswold]

IIRC, treasury stock is not considered outstanding. So, I think this pushes your individual into HCE status in your example.

[Mike Preston]

Agreed.