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That's interesting. But how do you file when there is no Plan Sponsor. I think my position will be just because you sign a Plan Document doesn't mean you have created a plan. Pretend there is a sponsor? And then sign, subject to perjury, that it is true, correct and complete? I think the rule about when you "find yourself digging yourself into a hole, stop digging" applies.

Goal is Retained Earnings for the first several years as well as reduce personal income during this period. Dividend could be zero during that time and thus double-taxation can be avoided. C-Corp seems to be the only entity that allows for Retained Earnings. What does your accountant say?

I would posit that it depends on the plan doc language. If it says entry date is next following, or coincident with... then the entry date is 12/31/15. Never mind that. It's immediate entry. So I would say that the person satisfied eligibility on 12/31, therefore enters the plan on 12/31. What about comp? Is it full-year or participation comp?

I wouldn't want to be the one making tax decisions and consequences based solely on an employees wages. You never know what their 1040 income looks like in other earnings/spouse's earnings etc. I think it is a flawed reasoning personally to guess that they generally don't pay any federal income tax. To me, this is too close to giving tax advice. But I don't tend to like auto-enroll although I've done enough non-discrimination testing in my lifetime to understand the purpose.