Which test needs to be satisfied if someone owns more than 1% of a company for key employee determination?

For the determination of key employees in a 401(k) plan, the threshold for identifying who qualifies as a key employee is critical. The 1% owner test is relevant here because if an individual owns more than 1% of the company, they meet one of the criteria that can classify them as a key employee under the plan's rules.

Key employees typically include certain owners of the business, and those with significant ownership positions are often perceived to have a substantial influence over decisions and outcomes within the company. This ownership stake can justify their inclusion within a specific classification for benefits, testing, and regulatory purposes.

The other tests related to ownership and employee classification are more concerned with different aspects of employee qualification rather than directly addressing the threshold established by ownership percentage. Understanding ownership within these tests is crucial for accurately determining a company's compliance with retirement plan regulations.