I believe the answer to this question is a clear "yes", based on Treasury Regs and "Constructive Ownership". But added confirmation and input is appreciated...

If more than 5% of Employer Stock attributes to a particular ESOP participant in a lookback year, is that participant considered to be a "5% Owner" and thus considered a Highly Compensated Employee of the Employer sponsoring the plan?

Thanks,
Espo, QPA

Looking at this question very briefly, I think you don't have to take into account the shares in the ESOP, if you parse through all of the code sectiions.

My initial guess would have been to agree with you. However, I looked into it, and I agree with Kirk.

Thanks very much... What in particular led you to conclude as such? Can you give me a citation to start with?

Sure - since stock attribution for H/C purposes is IRC 318 attribution, and 318(a)(2)(B)(i) excludes stock under an employees' trust described in 401(a) which is exempt from tax under 501(a), and an ESOP is such a trust, then I don't see that the attribution applies here. I didn't go any further than this, as it didn't seem necessary.

Excellent! Thanks very much...

Espo

Sorry to join this late but does anyone have an opinion as to why even though shares owned by an individual in a 401(a) plan are ignored for purposes of computing 5% ownership (as discussed in previous posts to this thread), the total of such shares owned by the plan are included in the denominator for 5% purposes? I say that b/c 416(i) and 318 don't appear to exclude plan shares from the definition of 5% of the outstanding stock. Seems like a heck of a deal.