Key Employee definition

I believe this is an easy question but I want to be 100%.  Plan sponsor has 2-1% owners who are employed by the business.  The other 98% is owned by the mother of one of the 1% owners and she does not work for the plan sponsor.

Clearly seems the 1% owner would have her ownership attributed to him then as a 99% owner.  I know some nuances changed in the last several years.

Comments?

Thank you,

Tom

Yes, the definition of "Key Employee" requires attribution under the Section 318 rules under which an individual is attributed the ownership of his/her parents in the same entity. The 1% owner with the mother who is the 98% owner is deemed to own 99% of the shares of the entity.