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I don't see how a fee resulting from the plan sponsor depositing a rubber check could possibly be considered a reasonable expense of administering the plan. ERISA 404(a)(1)(A)(ii). The plan sponsor needs to reimburse the plan.

No question the employer should reimburse the plan for the fee it caused by bouncing the check. The more important question is what happened to the EMPLOYEE assets in the account since they bounced a check of deferrals? Did the employer use employee contributions to cover business expenses?

probably best to make sure the NHCE have signed election forms indicating 0% otherwise down the road someone may claim "no one ever told me about this"

Is this an entry for the "dullest career" competition? I agree with RBG - they are participants as of 1/1, but the deferral feature simply isn't open yet. BOY count = 10.

You are focusing too much on the deferral effective date even though it is only one of several plan features. If the plan effective date is retroactive to 1/1/18 and the employees are eligible and enter 1/1/18 your count is 10.

the only possible exception would be if key's were not allowed to 'defer' except for $6000 in catch up. obviously not in this case based on your description, but there is that possibility

Top heavy minimum is required.

You don't say what kind of business was the sponsor. Was it a corporation, LLC, sole proprietor? All plans have to have a sponsor, trustee and plan administrator. So does it have all of these? Just because the owner doesn't work doesn't mean he got rid of the corporation and there are threads on this board where people discuss if a sole proprietor really ever goes out of business as long as the person is alive. So, I think more information is needed to fully answer you question. Although at some point all plans have to be formally terminated has always been my understanding. You can read threads about the headaches having this person die and not leave anyone behind who is legally able to make decisions for the plan. So some thoughts about how to terminate the plan and get the assets out ought to happen now it sounds like.

Yes, it is very likely to pass. Will pass every year you run the test. And fail every year you don't. ?

Have you read 1.88 of the Master Text? I believe the answer is there in conjunction with how the AA was completed in the "Eligibility Requirements" Section. Also have you tried posing the question to Corbel/FIS directly, I found they are usually very good about giving responses concerning their document.

You might check this post: https://benefitslink.com/boards/index.php?/topic/59567-hardship-withdrawal-for-health-insurance-premium/

I am a benefits person, so I cannot comment on the payroll arrangement, and my concern would be with benefit eligibility. If in fact the employee was not employed by the other organization, I highly doubt they were eligible for their benefit plans. The issue is rarely raised by the benefit provider until their is a significant amount of money involved, such as a death payment or disability determination. Good luck.

Sometimes it seems like the wild wild west out there the way a lot of small non-profits (and churches in particular) operate, and trying to explain the rules and get them to do things the right way as opposed to the easy way and the way they've always done it can be a big up hill battle - and it's just a lack of understanding from volunteers who take the path of least resistance. I don't think you are wrong. Administering payroll for someone else's employee(s) - not a problem, I guess, although who is listed as the employer (EIN, etc.) on the W-2? Considering that person as your employee for benefit purposes, especially retirement plan(s)? Big problem, as I see it, and would definitely dig in your heels to do it right (or have the other employer adopt as participating employer).