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If he's really serious about doing this, I'd suggest he file for a private letter ruling. Considering the potential worst case scenarios (e.g., plan disqualification and excise taxes), it's worth the price to know if it's going to work or not. Or for the price of filing a PLR he could set up a special trust just to benefit his former employees. That way the money won't also go to benefit other plan participants who weren't his employees. Maybe give the trust a 20 year life and disburse to the employees at the earlier of 20 years or the employee attaining age X. He could contact a "community foundation" in his area and they might agree to administer it if he wanted to put some additional $ in and set it up as a charitable remainder trust (still funded by a bequest).

Pad your bill!

FWIW, I submitted this question for the "Ask the Experts" session at the ASPPA Annual Conference last week. I was surprised when it was the first question addressed. Sal said they are eligible for the TH minimum using full year 415(c ) compensation. I didn't completely follow his brief explanation, but he was clear that he thought a non-key participant who was eligible to defer for part of the plan year and who is employed on the last day of the year should receive the TH minimum. He asked the panel if they agreed and they did. Another panelist pointed out that the regulations do not say you must be a participant on the last day of the year.