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[I re-worded because I didn;t like it before!] I worked on a DC Plan with a "big law firm" and their position is consistent with EBECatty. In other words, if you are deferring payment/taxation for a "short-term" that is ok. If it were taxable immediately even if paid a short time later, there would be no value (or really meaning) to the rule.

Yes. If you read the instructions for the 5500 re late deposits it actually says they need to be reported until the year after the violation has been corrected. The correction includes late earnings deposited.

Technically, the answer to your first question is certainly "yes," but I assume what you are really asking about is whether there would be any 410(b) coverage or other qualification issues/roadblocks to address. Someone needs to determine if the Schedule C trade or business is a member of either a 414(c) group or a 414(m) group with the medical practice partnership (or any other trade or business with employees). If not, there shouldn't be any issues with setting up a separate plan just for the doctor's Schedule C business.

And I did not mean to imply that the 2678 payroll arrangement would cure the employee benefits coverage issue. That is a seriously hot potato.

Wouldn't it also be a short-term deferral exempt from 457(f) as well? I had understood exemption as a short-term deferral under the proposed 457(f) regulations to result in taxation in the year the payment is actually made (i.e., you avoid the "early" taxation rules under 457(f) and the payment is taxed when actually or constructively received). So if it vests in 2019, but is exempt from 457(f), it's taxable in 2020 if paid in 2020. No?

Bird, look at IRS Form 2678 and its instructions. It may be that an arrangement of they type implemented by using this Form is in effect.