Subscribe to Free Daily Newsletters
Post a Job

Featured Jobs

Executive Director

Employers Council on Flexible Compensation (ECFC)
(Washington DC / Telecommute)
MEP Assistant Team Leader

Nova 401(k) Associates
(Houston TX / Dallas TX / Austin TX / Scottsdale AZ / Telecommute)
Employee Benefits (ERISA) Associate Attorney

Stinson LLP
(Kansas City MO / Minneapolis MN)
Senior Retirement Plan Administrator

RetireWell Administrators, Inc.
(Marlton NJ / Telecommute)
401(k) Plan Administrator
Southern Pension Services
(Tampa FL)
Relationship Manager

Benefit Plans Plus, LLC [BPP]
(Saint Louis MO / Edwardsville IL / Henderson KY)

Free Daily News and Jobs

“BenefitsLink continues to be the most valuable resource we have at the firm.”

-- An attorney subscriber

Get the BenefitsLink app LinkedIn
Twitter
Facebook

BenefitsLink > Q&A Columns >

Who's the Employer?

Answers are provided by S. Derrin Watson, JD, APM

HCE Attribution Rules Between Parent and Child

(Posted December 21, 2000)

Question 69: An employee who owns 3% of the company is an officer. He earns more than $85,000 annually, so he is both a "highly compensated employee" (HCE) and a "key" employee for top-heavy testing purposes. Is his daughter considered an HCE or a key employee?

Answer: Not necessarily. For both key employee and highly compensated employee purposes, the daughter is deemed to own all of her father's stock. That means she is deemed to be a 3% owner (more if she owns some outright, of course).

But being a 3% owner isn't enough. If Dad owned 6%, she would automatically be a key employee, but a 3% owner doesn't do it. She would have to be an officer, be one of the "top 10" employees, or have compensation exceeding $150,000. And those things aren't attributed. Dad's being an officer doesn't make her an officer, for example. Dad's having high compensation doesn't mean she is treated as highly paid.

Similarly, to be a highly compensated employee under 414(q), she must be either a 5% owner (not true in your situation) or have compensation herself over the $85,000 threshhold, as adjusted.

In other words, all that the attribution rules attribute is the ownership of stock, partnership interests, etc. They do not attribute status as an employee or officer, nor do they cause attribution of compensation.


Important notice:

Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner or to readers. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of this and similar situations.

The law in this area changes frequently. Answers are believed to be correct as of the posting dates shown. The completeness or accuracy of a particular answer may be affected by changes in the law (statutes, regulations, rulings, court decisions, etc.) that occur after the date on which a particular Q&A is posted.


Copyright 1999-2017 S. Derrin Watson
Related links:

(restricted access)

(restricted access)

© 2019 BenefitsLink.com, Inc.