The 2% ownership threshold is tested on any day during the tax year. If someone owned more than 2% at any point during the year, they're ineligible for tax-free CHOICE reimbursements for the entire year—even if they later sold their shares or diluted their ownership below 2%.
This applies on a calendar-year basis for tax reporting purposes. Consult your tax advisor about the timing of ownership changes and their impact on benefits eligibility.