Discrimination Testing If Everyone Is An HCE

Just wanted to clarify something and make sure I'm not missing anything.  The client moved to being a co-op, meaning all employers have an equal ownership of the company.  17 current employees, so each employee technically owns more than 5% of the company.

Am I wrong in thinking that this means everyone is an HCE, and therefore no ADP Testing is required?

Obviously, if they add people and have more than 20 employees that would have to be re-evaluated.  But currently, no testing would be required correct?

Thanks everyone!

Sounds right to me...Even 20 wouldn't work because 5.00 is not greater than 5  

2 hours ago, metsfan026 said:

,,,, if they add people and have more than 20 employees ...

In context, "add people" appears to mean more than "hire someone".  If the co-op hires an employee, that will differ from the co-op adding a new owner-employee.  Caution with terminology.

I have never worked with a cooperative so I don't come close to knowing the answer to your question.  I guess I just have questions for my own education.  Can it really be as easy as simply dividing 100% by the number of worker-owners?  If set up as a S or C Corp (presumably corporate), I guess the worker-owners would own stock but in a cooperative I don't believe that stock provides them with an equity or ownership right.  My understanding is that members of a coop usually only have the right to vote and the right to share in earnings.  That is, the amount of stock "owned" by an owner doesn't really determine their vote because in a coop each member technically is always equal as each just gets one vote, right?  Also, each member isn't allocated earnings based on their "equal" ownership rights but rather on their "patronage", e.g., the amount of work they put in or the amount of goods they put in.  For instance, if this is a farmer's coop and a member brings in one bushel of tomatoes and another member brings in a truckful of avocadoes, their shares of the profit from the sale of the aggregate amount of produce is not going to be equal.  Plus, if the worker owners were not treated as owners, I have to believe there would be a strong likelihood that there would be just a few HCEs and a multitude of NHCEs in these types of organizations.

Sorry for the questions but this is an interesting question though, for me, purely academic.