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457 plans for tax-exempt (non-governmental) employers are non-qualified plans and, as such, are subject to the claims of creditors (as is his concern) and are not afforded favorable tax treatment upon distribution (distributions are taxed as ordinary income, and you cannot roll over to anything except possibly another NQ 457(b) plan of another tax-exempt entity if such plan allows).

Your experience may be different, but among prospective clients I've met with recently who have "1099 workers" about half really have misclassified common law employees. If the clinic has common law employees, the answers to your questions will be different.

NAPA Net sent out an email today with an article you may find helpful. https://www.napa-net.org/news/technical-competence/case-of-the-week/case-of-the-week-voluntarily-correcting-governmental-457b-plans/ When you get to the EPCRS Rev Procs, searching for "overpayment" is a good idea. There are several references to overpayment in different locations. Under EPCRS, the term overpayment includes an amount distributed in excess of what is allowed by the terms of the plan. When looking at the correction method for an overpayment from a DC plan in 6.06(4), don't overlook the last sentence of 6.06(4)(b).

Are you the actuary? If not, have you discussed this with the actuary? Rules for such changes can be found in Rev. Proc. 2017-56. https://www.irs.gov/irb/2017-44_IRB#RP-2017-56

If the plan isn't TH now, no one is subjected to that schedule. Can't you just amend the plan to have the TH schedule match the regular one? There's no cutback b/c no one is currently on that vesting schedule.

Even if Title I of ERISA does not apply, the plan is still subject to IRC 4975. Since it's an S-corp, the owner's wages are reported on a W-2 and the deferrals must be withheld by the end of the year. Once they are withheld from pay they become an asset of the plan and use of plan assets by a disqualified person is a prohibited transaction (exemptions notwithstanding). Like ETA said, there are no black-and-white rules on this, but the DOL 7-day safe harbor is probably a reasonable standard.

https://www.dol.gov/sites/default/files/ebsa/about-ebsa/our-activities/resource-center/faqs/faq-efast2.pdf Q25: Will the EFAST2 system still receive my filing if I do not attach the IQPA report with my Form 5500 annual return/report when it is required? The EFAST2 system will receive your filing, but submitting the annual return/report without the required IQPA report is an incomplete filing, and the incomplete filing may be subject to further review, correspondence, rejection, and assessment of civil penalties. Also, if you do not submit the required IQPA report, you must still correctly answer the IQPA questions on Schedule H, line 3. This means you must leave lines 3a and 3b blank because the IQPA report is not attached and must also leave line 3d blank because the reason the IQPA reports is not attached (i.e., was not completed on time) is not a reason listed in any of the available check boxes. You should still complete line 3c if you can identify the plan’s IQPA. Please note that failing to include the required IQPA report and leaving parts of line 3 blank will result in the system status indicating that there is an error with your filing because, as noted above, submitting your annual return/report without a required IQPA report is an incomplete filing, and may be subject to further review, correspondence, rejection, and assessment of civil penalties. Thus, if you find it necessary to file a Form 5500 without the required IQPA report, you must correct that error as soon as possible. ADDITIONALLY: The DOL may send a notice when a return is rejected as incomplete under ERISA 104(a)(4). 104(a)(5) provides for the 45 day correction period. The article (see ASPPA Article below) says the letters the DOL sent in 2015 about missing audits were not Notices of Rejection, so they did not start the 45 day clock ticking. From 2560.502c-2(b) (3) For purposes of this paragraph, the date on which the administrator failed or refused to file the annual report shall be the date on which the annual report was due (determined without regard to any extension for filing). An annual report which is rejected under section 104(a)(4) for a failure to provide material information shall be treated as a failure to file an annual report when a revised report satisfactory to the Department is not filed within 45 days of the date of the Department's notice of rejection. A penalty shall not be assessed under section 502(c)(2) for any day earlier than the day after the date of an administrator's failure or refusal to file the annual report if a revised filing satisfactory to the Department is not submitted within 45 days of the date of the notice of rejection by the Department. SEE ALSO this recent message board post on BenefitsLink: https://benefitslink.com/boards/index.php?/topic/62117-large-plan-audit-not-done-by-extension-deadline/ And this 2015 ASPPA Article: https://www.asppa.org/News/Article/ArticleID/5554 DOL Initiative on Missing Plan Audit Reports By Janice Wegesin • November 05, 2015 • 0 Comments On Monday, Nov.2, 2015, the Employee Benefit Security Administration (EBSA) sent about 1,200 letters by email to filers of 2014 Form 5500 that did not properly include the report of an independent accountant. The emails do not constitute enforcement correspondence — that is, the letters are not Notices of Rejection of the Form 5500 filing and do not start the running of the statutory 45-day correction period. Emails of this type generally are sent to the individual whose credentials were used to file the Form 5500 series as or on behalf of the plan administrator the Form 5500 using the EFAST2 guidelines. If the practitioner/filer rules were employed, generally the practitioner will be the recipient of the email. However, the correspondence should be a warning that the DOL has the situation on its radar and put pressure on the plan sponsor/administrator and the benefit plan auditor to quickly wrap up the audit and file an amended 2014 Form 5500 report including the report of the independent accountant. If the 2014 filing is not perfected in the next few weeks, such filers should expect EBSA to issue formal Notice of Rejection letters, which will be sent via express delivery service (e.g., USPS or UPS). These letters generally will be directed to the plan administrator named on the filing and will indicate that the 45-day statutory correction period has begun. Janice M. Wegesin, CPC, QPA, is President of JMW Consulting, Inc.