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I believe the reference is to the 5th Circuit case, the decision in which should come any day now. However, because the unconstitutionality argument is based on the repeal of the individual mandate tax as part of TCJA, and the repeal was not effective until 1/1/2019, the complete unconstitutionality of the ACA (if that's what the 5th Circuit holds, and there are a lot of other ways it could come out) will not reach back earlier than that. In any event, a decision by the 5th Circuit that the ACA is now wholly unconstitutional would be appealed to the Supremes and a 5th Circuit judgment of unconstitutionality would be stayed during the appeal. I should add that the IRS isn't any better at getting blood from a turnip than anyone else. If all else fails for your client, jireh87, and you get the assessment, you can always try to negotiate over ability to pay. If an ALE neither provided coverage nor reported, then you face both the ESRP and 6721 and 6722 penalties. You might get the penalties mitigated. I suspect the only way to reduce the ESRP is based on ability to pay.

It needs to run through the trust and he needs to receive a 1099-R. Ask the broker to put it in writing that he'll personally indemnify the Plan Sponsor for any all penalties that may arise from the Plan Sponsor Paying the participant directly outside the Plan. I'm not sure why it's a problem reopening the account but you can open an account in the name of the Plan anywhere and pay it out from there.

CPS, I agree with justanotheradmin. My point only applies to matching QACAs.

I do think you are correct about the forfeitures. A QACA SH subject to vesting will allow some forfeitures to occur, and those can be used in future years towards new safe harbor contributions. I don't see how having fewer participants deferring or not will impact that. If the QACA was structured as a match, yes, it might be more expensive due to increase participant from automatic enrollment (but also create more forfeitures), But CPS mentions a QACA 3% nonelective. So the traditional 3% SH nec will be the same as a QACA 3% nec (absent forfeiture available to reduce). It isn't impacted by how many defer.

cathyw, you are correct to be concerned. If both (a) the "borrower" is a pass-through, e.g. LLC or LP, and (b) the "loan" were recharacterized by IRS as in substance equity (e.g., preferred partnership interest), then sure, you would have UBTI. I don't think there's a lot on this. Lots of plans and IRA's make loans with "equity kickers." Wise to follow the "pigs get fed, hogs get slaughtered" principle. An analysis would take into account the market rate of interest, security for indebtedness, share of profits, etc.

$38,500 in ADP test as as he exceed his 402(g) limit for the 2019 and 2020 calendar years during the single plan year ending 6/30/2020 and catch-up contributions are not included in the ADP test. He has also used all of his catch-up for 2019 and 2020 so if the plan fails the ADP test there in nothing left to recharacterize.

Hence, laying waste to the only path available under the IRC and ERISA to punish a participant. Anything else smells very much like an ERISA 510(a) violation. I wonder if the sponsor would give up on their own personal idea of what is right or wrong if they were made aware of the potential penalties for an ERISA 510(a) violation? Hardly seems worthwhile when potentially facing jail time.