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Did not pick up from the original post that they filed as a large plan last year. I understand the instructions to key off of the number of participants as of the beginning of the plan year. They filed a full 5500 last year (presumably with an auditor's report) for 2014. Is it safe to assume that, notwithstanding the fact that they had only 98 participants at the end of 2014, they had over 100 at the beginning? As for inheriting the plan from someone who told the sponsor they would not need an audit for 2015, I am reminded of a presumably apocryphal story from the old Soviet Union: When Krushchev became premier after the death of Stalin, an official gave him two sealed letters from Stalin with the instruction that when the first crisis occurred, he was to open the first letter, and upon the second crisis, he was to open the second letter. After a period of time, a crisis occurred, and he opened the first letter from Stalin. It said only "Blame me". So he blamed Stalin and the crisis passed. Later, when the second crisis occurred, he opened the second letter, which said, in full, "Write two letters."

Seriously. Why isn't the plan sponsor asking the CPA?

I wish we could shorten that timeframe to a number of days after reviewing a pay stub.

Maybe it wasn't a safe harbor plan after all? Check the Notice.... was it timely? was it deficient? If the Notice was invalid that means what? Is it then not a SH plan which can be aggregated for coverage. It would seem that the aggregated plan would have to satisfy ADP if the effect of aggregation is to add a zero % HCE to the mix. Or maybe, if that doesn't satisfy the paranoid amongst us, at the least it offers a EPCRS submission with the suggested cure being the aggregation of the plans for coverage and non-discrimination.

Suggest that the broker check to see what the plan says.

When it is as clear as this is (a violation of 410(a)), I don't think an "ERISA counsel CYA" will protect your firm very well. What you need is an opinion of your own, unconflicted counsel that reliance on said ERISA expert's opinion is reasonable.

On that note, do the work per the ERISA counsel. Keep their written opinion on the matter, and in your correspondence to the client, add something to your cover piece such as: We have allocated your 2015 PRofit Sharing according to the plan document and according to the opinions (guidance, recommendations, etc) of ________ (name of ERISA person).

I still say run.