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Tom, let me recap a bit. The simplest solution for you would be achieved if you could definitively rule out the possibility that the partnership is part of an Affiliated Service Group (ASG) with you and your co-owner's S-Corp. If so, then it is perfectly permissible for your S-Corp to sponsor two separate 401(k) plans, one for each of you. However, nothing you have written allows a definitive conclusion regarding the existence or lack thereof of an ASG. If you can state the nature of the partnership (that is, what does the partnership do to make money) and the nature of what you do to earn the approximate $20,000 that does not come from the partnership, it just MIGHT be possible to rule out the existence of an ASG. Fair warning: it is far from certain that even if you provide this information a definitive conclusion can be reached. It is far more likely that it will just lead to more questions. If you are trying to make a determination before the end of the year (for whatever reason) I urge you to abandon these forums and hire somebody (not me, I'm far too busy between now and the end of the year).

Open a freakin' checking account in the name of the plan/trust and deposit the deferrals. Transfer electronically when you can.

Plans can have a safe harbor definition of compensation that excludes taxable fringe benefits. That DOES depend on plan language and I am glad to have the opportunity to clarify my statement that plan language does not matter for income tax purposes.

I see no nuances in the applciable laws. The IRC and CFR are both very clear on the issue(s). Additionally, since most of the clients are small employers they would also fall under their state small group/employer health insurance laws. Almost every state prohibits the employer reimbursement of premium. This prohibition is also reflected in the individual health insurance application of every malor insurer. So even without ACA, these small employers are not allowed, by state insurance law and the insurance contract, to reimburse the premiums paid by the employee. The red herring which seems to be causing thoughts of "nuances" is the continued focus on ACA regulations especially in regard to "annual limits" and "excepted benefits. The ACA regulations change nothing relevant. The arguments posted on Page 1 of this thread are all still valid. What many do not seem to realize is that the reimbursement under an "employer plan" was allowed by Treasury under Revenue Ruling 61-146 et al, not by IRC or CFR. Treasury can and now has effectively retracted Rev. Ruling 61-146 et al. There has been no change in applicable IRC or CFR which is why a Notice could be used. The issue is entirely at the discretion of Treasury. Zane knows all of this but finds it easy to confuse the issues with red herrings and irrelevancies, since their clients are small businesses who do not have legal or tax advisors, but who rely on their agent.

401 Chaos, thank you for your further observations. Before an employer relies on an indemnity as a reason to take on risks, the employer might want advice about exactly which risks the indemnity responds to, and about whether the indemnity might be legally unenforceable. If the employer knew or ought to have known that it was accepting legal advice from a non-lawyer, a court might be reluctant to enforce an indemnity promise that facilitates the non-lawyer's conduct of engaging in the unauthorized practice of law.

I'm unaware of an employee-benefits lawyer who would say an employer's reimbursement of its employees' payments for individual health insurance is proper.

Yes. The NC Bar was hearing a case on "unauthorized practice of law". There may be a detailed summary on their website; my recollection is that those people authorized to "practice" under ERISA (enrolled actuaries, accountants, attorneys, enrolled agents, etc.) are not in violation of the UPL statute as long as they stick to the ERISA matters. Don't assume this applies in any other jurisdiction.

Well wouldn't you know, that's my precise scenario...