Newly Key - as of exactly when? and a death question

[ldr]

Good morning to all!

We have a plan where there are two Key employees as identified by our software and they both surprise us in how they were handled.

The first one was already HCE in 2016 but not Key, by virtue of his salary.  He does not own any stock in the company.  In 2017 he became the President of the company.  The software identifies him as a Key employee in 2017 and we thought it would be 2018 before he would be considered a Key employee.

The second employee was Key already but died in 2017 and his account balance was distributed before 12/31/2017.  The software put his distribution in the account balance column as a negative number and subtracted it from the President's account balance to get a net difference for the Key employees' balances for the year.

To be clear:  President has let's say $200,000 which is considered a Key balance, to our surprise, and deceased person's distribution of his $10,000 account balance is picked up as a negative number in the test, so the net Key balances on the Top Heavy Test are $190,000.

Does this seem normal to any of you?

Thanks in advance for any advice.

[ldr]

Hi to all,

Never mind.  We solved it ourselves in the meantime.  One team member was confusing the lookback year for HCE with Key determination rules, so that took care of President.  Then, I did not realize that the deceased participant actually has a negative balance in our software!  (oops on someone's part).  The Top Heavy test is simply recording the balance of that participant as it stands and not "subtracting" the distribution from the total as I was originally told.

Much ado about nothing - thanks anyway - have a great day!

 

[david rigby]

As a reminder, but not necessarily relevant to your Q, the title of "president" does not automatically make someone a Key EE.

[ldr]

It's not my case (another member of our team has it) and I just assumed that he meant that the person is the corporate officer type of President and not just someone who was given a meaningless title.  I guess I should go ask!  Thanks.