Top Heavy Testing

I've had related questions in the recent past and so thank you for past comments.  But I'd like to make sure I put the whole picture out here.  

Corporation is 100% owned by an ESOP.  Corporation sponsors a 401(k) plan.  There are 5 corporate officers.  These 5 plus an additional 10 constitute the ESOP Board of Directors.  All 15 Board members are 401(k) plan participants, not all have balances.  The 401(k) plan is a deferral-only plan with about 250 participants.

So the question is who is a key employee?   Only 2 of the corporate officers have wages of $200,000.  None of the other Board members has wages of $200,000.  No one is a >1% or >5% owner of the corporation since it is 100% owned by the ESOP participants.  I see past comments that plan balances in an ESOP are not treated as owned by the individual but by the trust.  Even if I treat all ESOP Board members as key employees, the plan is far below 60% but obviously I have to get this right. 

And as for the ADP, we are just looking at compensation for 2021 in the 2022 HCE determination process.  There have not been individual owners for about 5 years.

Thank you for comments - they are greatly appreciated as top heavy is critical and can be very ugly - 3% for all non-key.  Tom

On 3/17/2023 at 3:49 PM, Tom said:

Even if I treat all ESOP Board members as key employees, the plan is far below 60% but obviously I have to get this right. 

TH is a +/- determination, there are no shades of top-heavy.  If your most conservative take still leaves you well on the not side, then so be it.  If it eventually does shift to the bad side, or shows signs of being sensitive enough to flip from one year to the next, then convince the client to spend the fees for some corporate governance legal consulting.  Otherwise, you've put too much time and worry into something that isn't an issue.