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What K2retire said. The employee is a participant on their entry date based on the plan provisions and eligibility, regardless of their electing to defer. So turning in an election form now is merely submitting a change in the election, not enrolling in the plan. Does the plan document actually have hard-coded language that says participant may change their election only twice a year? This is unusual (though not unheard of) in my experience.

Remember that deferral changes and plan entry are not necessarily the same thing. This is something many plan sponsors don't understand.

A non-certified copy of the death certificant coupled with a copy of a newspaper obituary, either hard or one printed out on-line, should be sufficient.

If the trust (really, the trustee) has at least one employee (including a person who is a deemed employee under IRC 401©) who might become a participant, I'm unaware of any special reason why such an employer could not establish a retirement plan. There can be non-nefarious reasons why a trust creator might want a trustee to operate a business. If the corporation has S corporation flow-through treatment and the trust would be a grantor trust that has the trust's income taxed to the grantor, it's possible that the Federal income tax treatment might not be too much different. tbp, consider being extra careful about the scope of your advice or service.

See IRS Notice 2014-55

If the plan was first terminated and then the owners were able to request a distribution earlier than the non-owners there is definitely a benefits, rights and features violation with or without the fee issue. Probably a failure to follow plan terms violation, too. Somebody should tell the owners that the money they no doubt rolled is subject to immediate taxation because the plan could very well be disqualified due to their actions. Then head on over to your friendly neighborhood ERISA lawyer for some guidance on what they should do to fix this. I know I'd suggest that they took distributions of in excess of what they were entitled to and suggest that they follow the EPCRS procedure to recover that excess. The amount of that excess would be determined as their pro-rata share of the expenses charged along with a share, if any, of any trust value decline which took place after their distributions and before the non-owners were paid. But that is just me.

You do not need to process two distributions. The spouse will get the decedent's RMD for the year of death if he/she had not previously taken it. The spouse's first distribution as a beneficiary based on his/her single life expectancy occurs in the year after the death. The spouse can do a rollover also and switch to the uniform table for distributions. If the rollover is accomplished during the year of death, the spouse's first distribution from the rollover account will occur in the year after death. The rollover can be done at any time; the spouse will sometimes receive one or two distributions as a beneficiary before the rollover. Distributions are much smaller under the uniform table so many spouses roll over as soon as possible to get the maximum tax deferral from the IRA assets.