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So there you go....one opinion saying almost everything would satisfy the criteria and another saying hardly anything would satisfy the criteria. Aren't we all glad the IRS gave us such clear direction....

You may have another problem: If the facts show that he was "over-allocated" and overpaid, but does not re-pay, does that alter the viability of hiring and/or contracting with this person? And think about this from the viewpoint of the rank-and-file EE.

True. It was never unvested money. Those funds should go to an unallocated account (as opposed to the a forfeiture account) and be used to offset future ER contributions. (In fact, EPCRS says there can be NO ER CONTRIBS until the unallocated account is exhausted.)

Ours just says match is discretionary. That's it. We have the option to put in a formula, but why do that? That's the document. The r/k system is a different matter. I would be difficult to allocate different formulae to different groups, but not impossible, I think. (Put people into divisions and run a match for each division, changing the formula as needed)

I can't find this scenario in the instructions but I assume it is describing allowing a rollover of an RMD and not the second part; effectively correcting it by making a later distribution. I agree that without the later deposit, this is fixed by issuing 2 1099-Rs and the participant could/should withdraw that as an excess contribution. But I also think that the way it was handled was fine; frankly, the IRS doesn't care that much about which distribution was the RMD as long as it was done. I also think this guy may be surprised and unhappy if you follow the rules - it sounds like he wants a 1099-R showing 100% rolled over, and that would definitely not be correct. If he has the money and is willing to write a check to the plan but not to the IRA he's just being a jerk and asking for trouble since the 1099-Rs will be spanning two years, and while we might all be surprised at what the IRS does not look at, I'm pretty sure they are matching 1099-Rs to what is reported on the 1040. Further, if he took the RMD from the IRA as he claims, he probably did it as a regular distribution and not an excess, and (again) if the plan processes the 1099-Rs correctly, he's done the wrong thing and should at the very least get that code changed to an excess, not regular distribution. Long story short, it sounds like he wants the plan to report based on what he did, not what is correct. The plan has no way to know that he took the RMD and must report accurately.

Maybe it is jut me but your facts and questions don't make any sense. Please re-read it all and see if you think it makes sense. Here are some observations: 1) You make it sound like you forfeited 3 people who were still active employees. 2) You say you sent a notice to the 4th person about repaying the forfeitures. Why did you do that? Was this person rehired? If so, then why are you asking now about them being a sub-contractor? If the rehire was this person as a sub-contractor then why did you send the repay notice as that would only apply to a person who is rehired as an employee. But otherwise why would a person who termed and was paid ever repay a forfeiture? 3) You ask if there is any implications regarding "future payments". Payments from the plan? If so, does this person sill have a balance in the plan? (Not sure it matters) Payments as a contractor? I will make this observation right off the bat. If an IRS or DOL auditor comes in one of the issues they will raise was the termination a bonafide termination or done to merely get the person a distribution from a qualified plan. Likewise, if this person is doing the exact duties as they were as a former employee they are going to ask is this a legit contractor relationship Someone might want to look into those issues. Like I said it might just be me but I am more confused as to what your question is now then before I started to read your post.

There is no such thing as "cash" accounting for purposes of dealing with contributions. Absolutely none. The deduction can be taken in either year, subject to the following: 1) The plan termination date is in 2018 2) The amount considered and deducted in 2017 when added to what already has been considered and deducted for 2017 doesn't exceed the deductible limit under 404 for 2017. 3) If the plan termination date is in 2017 then there are some at the IRS who say that carte blanche exists with respect to 2017 deductions but 2018 deductions could be substantially impaired.