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Whether or not a contribution is a CODA would seem to be determined by drawing a line between "What happens if the contribution is made" and "What happens if the contribution is not made". In your case (and I'm assuming the PA is taxed as a corporation), the owner has a simple option, either make a nonelective contribution to the plan or pay the amount as salary. That is different from the owner paying a bonus and THEN asking "Do I defer part of this bonus to the plan or not". I seem a big difference. Good Luck!

If the excise tax is small enough (less than $100), you can pay the excise to the participants as part of the VFCP filing. You still have to prepare to the 5330 you would have submitted to the IRS and submit it to the DOL with the VFCP filing.

BG - as I understand it, who owns the ASSETS is immaterial - and I agree that the assets are owned by the plan regardless of whether it is a ROBS plan or not. The exemption is based on who owns the CORPORATION. So if my wife and I are the sole owners and employees of corporation A, then we qualify for the exemption. However, if the PLAN owns the corporation, then this requirement is failed, and we have to get the bond. Again, I'm just curious if folks agree or disagree, and if they disagree, what justification would you use to say no bond is required? Thanks again. P.S. - for my reasoning on this, see DOL 2510.3-3.

I would take into consideration some facts and circumstances. lets suppose I provided $1000 to one participant to pass nondiscrimination testing - let's say it gives it gives the person who was at 0 an e-bar of 5.00, just enough to get him into the rate group of the HCE now if that correction is only 20% vested I would argue at that point in time, knowing full well the person is terminated and has no chance to increase vesting, that the 'substance' of the amendment has not been satisfied. you have in effect provided an e-bar of only 1.00. or put another way, instead of provided a 20% vested contribution of 1000, I have in effect provided a 100% vested contribution of $200. I do not think that was the intent of providing a corrective amendment to pass testing. ... under its comments on discriminatory plan design using short term employees the IRS indicates they have an issue about being able to 'pass' but failing a reasonable interpretation of what is reasonable. I would hold that this would hold in a case of a corrective like the example I used. Examples of short service plan designs Some plans limit NHCE benefits to a specific job classification. The result, for discrimination and coverage purposes, is the same because this classification includes only the lowest paid or shortest service group of NHCEs. Another variation on this plan design provides coverage to NHCEs who work on an as-needed basis and earn very little each year. Some plan designs require 1,000 hours to earn a year of service for vesting but not for allocation purposes. In these plans, the low paid or short service NHCEs receive an accrual or allocation but don’t vest in the benefit because they never complete a year of vesting service. Other plan designs define a year of vesting service as the employee’s completion of 12-consecutive months of employment. This design allows the NHCE participant group to become vested in the very small plan benefit. Plans may discriminate even though they allocate a larger percentage of compensation to NHCEs. With this design, NHCEs, on average, may seem to receive a misleadingly large accrual or allocation level. For example, an NHCE participant with $200 of annual compensation may receive a profit sharing allocation of $200 (a benefit equal to 100% of compensation), while an HCE with compensation of $200,000 may receive a benefit of only 25% of compensation or $50,000. Although these designs may allow the plan to satisfy the vesting or numeric general tests for nondiscrimination and the associated regulations, they don’t satisfy Treas. Reg. Section 1.401(a)(4)-1(c)(2), which requires that the provisions of Sections 1.401(a)(4)-1 through 1.401(a)(4)-13 be reasonably interpreted to prevent discrimination in favor of HCEs.