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February 17, 2009

5-percent owner

Your Guide


5-perent owner

An individual who owns more than 5-percent of a company.


An individual who owns more than 5-percent of a company.

5-percent ownership affects qualified plans in several ways. These include:

For required minimum distribution purposes, a 5-percent owner is an employee who is a 5-percent owner with respect to the plan year ending in the calendar year in which the employee attains age 70½.

Referring Cite

IRC § 416(i)(1), IRC § 414(q)(1), IRC § 318, Treas. Reg. 1.401(a)(9)-2, A-2(b)).

Additional Helpful Information

For RMD and Top Heavy Purposes, 5-percent owner means—

  • If the employer is a corporation, any person who owns (or is considered as owning within the meaning of Code section 318) more than 5 percent of the outstanding stock of the corporation or stock possessing more than 5 percent of the total combined voting power of all stock of the corporation, or
  • If the employer is not a corporation, any person who owns more than 5 percent of the capital or profits interest in the employer

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.


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