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One doesn't trump ambiguity. One resolves ambiguity.

This is getting more complicated than I anticipated and I think points other than my original question may have been introduced. For the sake of simplicity and trying to bring this to closure, what I am saying is that the Code and regs are clear that you are TH or not for "a year" (say, Y1) based on whether more than 60% of value as of end of prior year (say, Y0) belongs to keys. The regs are clear that you also determine who are your keys for "the year" (i.e., again, for Y1), based on participant attributes during the prior year (i.e., during Y0). The Code is ambiguous on the latter point, but the regs and, as it turns out, legislative history and practicality, trump the Code's ambiguity on that point.

Again, not "authority" but... https://www.mckinleyirvin.com/family-law-blog/2013/september/5-misconceptions-about-common-law-marriage/ p.s. - what does it mean one of their families is prohibiting it? Not that I'm advising anyone, but they can get married without anyone else's permission - or even knowledge. The alternative is to simply name the other as the beneficiary....

IRS would look at all the facts and circumstances. Use of the words "called back" indicates to me that this was a layoff that could have been expected to be temporary and not a termination of employment. Also, I would look at how long the person was "terminated" and what the plan language says. If there was no break in service then upon rehire, the plan likely says it was as if the employee never terminated. But this really looks through the context of an employee quitting to get their retirement funds and then showing up to get their job back afterwards. If the separation was employer initiated then I'm more comfortable with the payout - but again, I think the F&C have to support this. Were all employment related benefits terminated, COBRA offered, etc. I also tend to be more conservative in this area.

I would have to see what the loan amounts were, terms of the loan, etc. before being sure, but I would expect that unless the loan payments were ridiculously low as long as something was paid each payroll that the loan is not in default. A simple spreadsheet should be able to prove it. So what if the participant is a bit behind in the amount due? Calculate the amount that the participant should deposit to bring the loan up to date, have that deposited and change future payments to the correct amount. Easy, peasy.

The person claiming to be a spouse, or surviving spouse, tends to drop that claim when confronted with the fact that the claim is completely inconsistent with what he/she has been telling Treasury every year under penalties of perjury. That was my only point. If he/she does not drop the claim, then you go on to the next step in the analysis.

You posit some very good questions. First, from my very basic research, it appears as though California has never recognized a common law marriage (as having been created in CA). If the common law marriage was created outside of CA, in a state that allows them (or did allow them at the time) then if MUST be recognized in CA under the federal Constitution privileges and immunities clause (and others). I haven't researched that though to see to what extent the courts have ruled on this issue. Filing tax returns as "single" (not married filing separately") is evidence of them not having a present intention (at some point in time) to being married. But it doesn't mean that they didn't have a present intention at some time, and then it becomes evidence of committing tax fraud. ? IF these people are residents of CA, have always been residents of CA, then I think it would be safe to say they are not in a common law marriage. Beyond that, it becomes a more difficult situation. FYI, I found this - not "authoritative", but provides some answers: https://www.cadivorce.com/news/common-law-marriage-myths/

Very impressive analysis of course, but omg. This is for hardship distributions. This is turning out to be the most complex policy change I can think of recent memory. It occured to me that for the daily val plans, this is going to be 100% driven by whatever policies the recordkeepers implement. Has anyone heard from them?

See also Notice 96-64. It modified 89-23 and you may be able to use it instead of 95-48 http://www.unclefed.com/Tax-Bulls/1996/NOT96-64.PDF