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Posted

Doctor who was 100% owner of his practice sells his practice to new owner (not related to the original owner), who is now the sole 100% owner.  The old owner continues to work as an employee in the practice now.  The 401k plan was top heavy before the sale.  The sale took place in 2018 (it is now 2019).

(1) since the sale, for the 2019 plan year, is the account balance of the prior owner now excluded for top heavy calculations.?  If so, does that continue for.....how many years?  forever?

(2) the adult son of the prior owner is also a plan participant and also continues to work after the sale.  He was a key by attribution before sale.  Starting in 2019, is he a key employee, non-key, or excluded from the top heavy calc?

Thank you.

Posted

I believe for 2018 and 2019 they are key employees since they owned (or are deemed to own) more than 5% of the company in the current year for 2018 and the prior year for 2019.

For 2020 and forward they would be former key employees.

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