Key Determination - Officer, need advice

There are three threshold for key determination- 

Key Employees

1. An officer of the company earning $180,000 or more annually;

2. 1% owner with a salary of $150,000 or more; and,

3. 5% (or more) owner regardless of salary.

Situation 1: Mr. David got compensation in 2019 $ 140,000 and in 2020 $480,500.

Question 1: Do I need to  consider him as KEY Employee in 2020 plan year (plan year end 12/31/2020)?

Situation 2: Mr. David Mr. David got compensation  in 2020 $485,500 with 1% ownership. 

Question 2: What will be his key status for 12/31/2020?

Thanks in advance.

Based solely on the information you have provided, and ASSUMING he had no ownership in 2019:

Non-key for 2020. IRC 416(1)(A) provides that the key employee tests are made for the plan year that includes the determination date. IRC 416(g)(4)(C) defines the determination date to be the last day of the prior plan year. except in the case of the first year of the plan.

So if no ownership in 2019, and with the comp level you provide, non-key for 2020. Will be key for 2021.

Not related to your question, but

4 hours ago, stephen20 said:

3. 5% (or more) owner regardless of salary.

This is not quite correct. To be a 5% owner you must own more than 5% of the company. Someone who owns exactly 5% is not a 5% owner. 416(i)(1)(B)(i)

Same goes for a "1% owner."

Agreed. I made an unwarranted assumption (assumed he was an officer, given that level of comp) re Key status for 2021...

Please 

Mr. David got compensation in 2019 $ 140,000 and in 2020 $480,500.
If Mr. David CEO of that organization, then should I count him as key employee (no ownership %) but he is mentioned as CEO (officer)? 
How should I count officer based on compensation (no ownership %)? 

Thanks all for your help.

If no ownership, then based on this information he is non-key for 2020. Key for 2021.

As an aside, you don't say when he was hired, and if employed prior to 2019, what was his compensation then? If he was hired in 2018, and his compensation exceeded the threshhold, he could be Key for 2019. I expect that isn't the case, but you need to be sure.

I agree with Belgarath. In order for the employee to be key for 2020, they would have had to satisfy one of the three conditions during 2019. It appears that they did not, since they were not an owner, and they were an officer but earned less than the required amount of compensation.

Don't forget there is a limit on the maximum number of officers taken into account when determining who is a key employee. Depending on the size of the organization and the number and compensation of other officers, this employee might still be considered non-key for 2021.