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The IRS considers sole proprietorships to go on and on and on and on..... until death. Your client should check with an accountant who will set him/her straight on the fact that his/her "business" was doing one thing at the beginning of the year and something else at the end of the year, but as far as the IRS is concerned it is the same business. Anything borne of the fruit that there are distinct businesses is poisonous. Act accordingly.

I think in Shakespeare's story McDuff kills MacBeth because of the insistence of working on a plan that had eligibility like that. guess Pmacduff wants to continue that? At least the line "Double, double toil and trouble; Fire burn, and cauldron bubble." implies such headaches! (hey, it's Friday, best I can do on the spur of the moment.)

Leaving aside the question how you get HCEs and NHCEs like this- or put another way for sake of my comment assume you can get what you are saying. You then have a problem. All Benefits, Rights and Features (BRF) have to be non-discriminatory on their own. So vesting has to be shown to be non-discriminatory on its own. it doesn't matter the HCEs might have had less time to put match in. You simply look at the fact you have a group of HCEs who have 2 YOS that are 100% vested and a group of NHCEs with 2 YOS that are 0% vested strikes me as a problem. For testing the BRF you might be able to test all HCEs and NHCEs so it might pass the test. I am not even sure what the non-discrimination test for this BRF would look like. But I can not imagine an IRS or DOL agent not having a problem with this fact pattern and not raising lots of concern. But I agree if the fact pattern given above can happen you need to be concerned.

There is no way to accurately answer your question via this board. What makes up your final tax bill is complex. The only way to do it would be do a draft 2017 tax return putting all of your information in it. You are correct the withholding on the withdrawal would be 20%. Can I suggest you go and pay for some tax advice from a CPA or tax prep person who can look at your whole situation, all your data and give you sound advice. The amount of money you are talking about a couple hundred dollars is a small investment in advice that could more then pay off in the long run. I would also recommend not taking it all at once (which could be enough money to put you in a higher tax bracket) but put it all in an IRA say at a local bank. You can then take out what you need month by month. It wouldn't be a taxable event until you take it out of the IRA. There is no mandatory withholding from an IRA which might be a bad thing as you could owe a lot the following April 15th. This way if you need less for any given month you can leave it in the IRA and not have a taxable event- might also make it less tempting to go to Vegas and blow it all! But a good tax advisor could help you work out these kinds of details including how to not have any surprised come April 15th.

I'm curious how one would be affected if they become an HCE within the 18-month period. Non-HCEs are eligible immediately, but 12 months later they could become an HCE and thusly ineligible for the Match. Would the document have to address this?

Who is going to be an HCE? When you have immediate eligibility, then the only possible way an individual would wait 18 months to enter would be if they are an owner. Also remember, everything that is legal isn’t administratively feasible. What, exactly, are you trying to accomplish?

It seems to meet three standards: 1) It cannot be a cut-back 2) It cannot be discriminatory 3) It is executed by December 31st (17) Normally, I would say yes. I wouldn't dare to answer without know what else is going on. Typically, everyone is going to be an NHCE on their date of hire unless they are an owner (either directly or through attribution). So, you have a plan that allows immediate eligibility for match where it previously had an 18 month requirement. The prospective vesting schedule for matching contributions will be a 3 year cliff (where all match that is currently there is 100% vested). One point of contention may be employees who were already there a year (but less than 18 months) and forced to wait. Regardless of any amendment, they would seem to be entitled to 100% vesting (because they have already waited longer than a year for eligibility). Just illustrating how I would go about determining how to get from where you are (18 month eligibility with 100% vested) to where you want to be (Immediate Eligibility with 3 year cliff vesting). It may require a little more detail to show no adverse impact. Good Luck!