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you are probably indicating that base pay is used for allocation purposes. (e.g. exclude bonus or commission, etc) that has nothing to do with HCE determination which should be total pay. that would be no different than using comp from date of entry for allocation purposes, you would still use total pay to determine if the person was an HCE

From this plan sponsor's point of view, the only burden, if you can call it that, is finding an appropriate place to store files (pretty easy) and not throwing the files away (easier still). That's been far less burdensome than if we had not had answers for former participants who have asked about whether they still have some benefit coming.

...or the sole proprietor is an attorney.

"We?" Isn't the sponsor in charge of setting terms of the plan? But seriously, it appears to be an amendment showing "favor" to one person, but that is prohibited for HCEs, not for NHCEs. Do you have any other reason to believe it could be discriminatory and/or inadvisable?

Just curious... assume plan sponsor closes the business (also terminated the plan). Who, then, keeps the records "forever". Does the plan sponsor still have to keep records "forever"? And what about plan sponsors that close their business, retires and/or eventually dies. How long is "forever"?

There really are a lot of people out there who only want what is right and fair. Of course, none of them are in politics...

We don't pitch stuff - we box it up and drop it off at the clients and telll them they need to keep it. I keep for several years past when we lose a client and then we box it up and give it to them.

First, the "forever" standard is part of ERISA - maintain records as long as necessary to determine benefits payable - and frankly, it isn't that burdensome. Buy another hard drive or rent some cloud space on another server. As far as Softie is concerned - I'm on a panel with their director of retirement benefits at an upcoming conference. They *have* every record from day one and employee one. I asked....

The problem here is that it is the PLAN'S responsibility to maintain the records - NOT the participants.... Every controversy requires a cost/benefit analysis to determine what is the most efficient outcome. I'm not saying just make an offer. I'm saying figure out what are the reasonable outcomes, what are the risks, and make a business decision.... Whether paying someone off sets a bad precedent or not is irrelevant (as is your snarky attitude). Plan has an OBLIGATION to maintain records. Plan did not. Plan may suffer consequences. The question is the best course of action to resolve it. There are three - find or recreate the records, settle the matter, or stick your head in the sand (or elsewhere) and wait for Schlicter {or another attorney) to come a calling....

Austin, you asked for suggestions. If you don't want any more just say so. The only one worth repeating is that the plan sponsor should retain counsel to get advice on what to say or not say to this person.

No, you're not missing anything. And not only does it not have to be affordable it also doesn't have to meet minimum value. So a "skinny" (MEC) plan ($50/month) might be attractive since it avoids the employer penalty in case the employer has misclassified the employee as "part-time" and if the employee takes it he avoids the individual penalty.