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Another keyboard lost.

For us, using PenChecks is the most cost-efficient way to handle 1099-R reporting, required for any distribution of $10 or more.

If the Adoption Agreement says "during any 1 prior year" then you are correct; basically anyone hired in 2016 and earning $5000 is in 1/1/2017. Those agreements should be read very literally, with no interpretation. As far as the meeting date, there's no requirement to have a meeting at all so it doesn't really matter. Changes can be made at any time so...whatever works for everyone is ok. But if you want it in November it's hard to see why the advisor would not accommodate that. SIMPLEs are not actually flexible; the rules are pretty specific. But there is in fact little or no oversight. The fact that there is no reporting (i.e. a "tax return" like we do for qualified plans) means that sponsors are generally unwilling to pay for administrative assistance. It sounds like you have a pretty good handle on how it should be run, but because "we've always done it this way and nobody said anything" you are getting resistance. It doesn't mean you are wrong. The investment advisor should stick to the investments end of things and not try to tell you how to run the plan.

I promise no keyboards were harmed in my mathematical excursions!

This is the key - your tax burden is higher solely because your account balance is higher. If you had invested that income and earned $100 in the market you would owe capital gains tax on it. Since plan earnings are taxed as normal income, not as capital gains, it is taxed as income when withdrawn from the plan.

Thanks Larry - I worked out the math on it using actuarial notation a while back, just to prove it to myself. I found it to be a very useful exercise.

Your taxes will be higher with the loan, but solely because you invested a portion of your account in an investment with a higher rate of return which resulted in your having a larger benefit at the end of the year - not because of anything intrinsic to the nature of the investment as a loan.

Not even the interest is double taxed. Let's say on 12/31/2019 your account balance is $50,000. During 2020 your account experiences a rate of return of 5% and there are no contributions. Your balance on 12/31/2020 is $52,500 and you immediately take a distribution. Your taxable salary for 2020 is $100,000 so your total taxable income for 2020 is $152,500. Now let's say you take a loan on 12/31/2019 for $10,000 at 5% interest, payable as single installment in 1 year (ignoring the quarterly requirement for simplicity). On 12/31/2020 your account is $42,000, plus you make your single loan repayment of $10,500, then take your distribution of $52,500. Once again your taxable income for 2020 is $152,500 - exactly the same as without the loan. If the interest portion of the loan repayment were pre-tax, then the taxable salary would have been only $99,500 and the total taxable income would be only $152,000 - less than without the loan.

No, participants are not double taxed on loans. I'd be happy to prove it mathematically if you like. Even though loan repayments are made with after-tax money, the loan withdrawal, unlike a plan distribution, is not taxed.

I've looked at it; in my view it's nothing but a gimmick and there's no reason for it in our practice.