XYZ covered the following employees under its qualified plan. 1. Rob, a 4% owner and employee with compensation of $32,000. 2. Robin, Rob's cousin, a commissioned salesperson with compensation of $160,000 last year (the highest paid employee). Robin owns 2% of the company stock. 3. Randy, the chief operating officer, who had compensation of $155,000 last year, but was not in the top 20% of paid employees. Assuming the company made the 20% election when determining who is highly compensated, which of the following statements is correct?
a. Rob and Robin are both key employees.
b. Robin is a key employee, but Rob is not.
c. Randy is a key employee, but not a highly compensated employee.
d. Neither Rob, Robin, or Randy are highly compensated employees or key employees.
b. Robin is a key employee, but Rob is not.
Rob - he is not a 5% owner. Attribution does not include cousins. His compensation is too low for him to be highly compensated.
Robin - she is not a 5% owner. Attribution does not include cousins. She meets the definition of highly compensated because her income is over $120,000 and she is in the top 20% of paid employees. She is also a key employee as she is a greater than 1% owner and has compensation in excess of $150,000.
Randy- he is an officer, but not an owner. However, he does not meet the definition of highly compensated because he is not in the top 20%. He is not a key employee because his compensation is less than the annual limit.
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