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I suggest that what is stated in the service agreement between this firm and the TPA is critical. Hopefully this is not a situation where a service agreement isn't even used. (That thought makes me cringe.) In our agreement we say exactly what we do and what it costs. We also stated that prior errors, issues not specifically related to our service, and/or issues arising from acting in a manner that ignored or was contrary to written advisement we provided, is not our liability. Given the big fat target placed upon the back of the TPA, I just think that as much as possible the terms of service must be clearly defined. Then, the claim that the TPA is somehow responsible for the payroll processing, when that is clearly an issue not under the TPA's purview, is totally baseless. So check out the agreement in effect, and modify future agreements as needed given this new experience. My 2 cents.

Rev. Rul. 80-155 was published in 1980-1 C.B. 84 -- which is indeed online. See page 102 of this large PDF (760 pages).

My reading of that IRS page is that the plan must treat itself as terminated for purposes of vesting, but not that the IRS will treat it as terminated or force it to terminate. The compliance unit identified plans that discontinued contributions and all they did was make them 100% vest, with no mention of forcing them to terminate and without any clear reference to special reporting or a dedicated Form. It said some of them had to amend their 5500s, but with regard to vested participants, not to report as a discontinued plan and not to mark a 5500 as final. So I read that as evidence suggesting the IRS does not, as a practical matter, require termination or even require extra reporting for plans that discontinue contributions. Whereas this page makes it sound more ironclad that the IRS does not treat a plan as fully terminated until the termination date is set, the benefits/liabilities are determined, and the assets are gone. Though for the original question, I think it will probably make sense to just terminate.

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.

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"

Stash 026, 1.72(p)-1, note that Q&A-19(b)(1) is also applicable, because even if the new loan would be adequately secured, e.g. with payroll withholding, the defaulted "deemed distributed" loan is treated as outstanding for purposes of the $50,000 loan limit, as well as an plan limit on number of loans, as pointed out by justanotheradmin.

It comes down to creditworthiness. I would check the fine print of your loan policy. The one that is part of the document we prepare for clients goes into detail about it, and even specifically mentions that a a Participant who has defaulted on a prior loan and has not repaid it with interest it NOT creditworthy.