Facts:
- Plan is a small law firm with 6 key ee (five are actual owners)
- The sixth key is the wife of one of the owners (family attribution)
- Plan is top heavy
- Wife contributes 401k as a key
- The husband of the spouse became a judge and terminated employement with the law firm in 2011

Question - What is status of husband and spouse ownership in 2012?

Both will be key's in 2011. Husband will be counted as key in 2012 due to look back year. What about the spouse? If she is still working in 2012, will she be a key in 2012? Does look back apply towards family attribution?

Doesn't look as if she'd be key employee for 2012 (what are we looking at, a 3% contribution). Question, is the owner giving up is ownership or is he merely terminating employment?

Good Luck!

I thought the spouse would be considered a key employee for 2012. When determining the key employees for the 2012 plan year you look at the employees that owned or were deemed to own >5% stock during the year that includes the determination date. The determination date for the 2012 plan year would be 12/31/2011, which means you look at >5% owners during 2011. Since husband owned more than 5% in 2011 then wife would also be considered an owner, and therefore, key for 2012.
Agree/disagree?