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If still PC, then either it's a C or S corp and a C wouldn't be issuing K1's so sounds like an S, and the Bird tweets correctly - not on W-2, not compensation/earned income. Simple rule of thumb question - are you paying FICA/Medicare taxes or SECA self-employed version on the income? If yes, OK for comp/earned income but if not, then SOL.

No, individual medical premiums cannot be run through a 125 plan. Also, keep in mind part-timers probably do not qualify as an eligible employee anyway.

Amending the plan is not required, just for her to transfer her account to you. She can establish her account with you, and transfer her balance to you, when permitted . She would need to provide you with a copy of the Form 5305-SIMPLE . So, for her account with you, the documents would be a copy of the Form 5305-SIMPLE that was used to establish the plan and your firm's SIMPLE IRA Adoption agreement ( Form 5304-S or Form 5304-SA). All new SIMPLE IRA contributions would need to be made to her old account ( because of the DFI rule under Form 5305-SIMPLE), so that would have to be kept open, and the contributions can then be transferred to the account with you, when permitted ( there might be restrictions on when amounts can be transferred- those, those are hardly ever instituted). Each employee is permitted to do this. The account with you would not be eligible to accept new SIMPLE contributions- only transfers and rollovers. A SIMPLE can be amended only as of January 1 of a year .The amendment should conform to the 60-day notice. So it might be too late for 2020. If the plan is amended to a Form 5304 , then all the participants would be permitted to choose their own custodian ( No DFI)

Is this what you're looking for? 1.401-10(b)(2) If a self-employed individual is engaged in more than one trade or business, each such trade or business shall be considered a separate employer for purposes of applying the provisions of sections 401 through 404 to such individual. Thus, if a qualified plan is established for one trade or business but not the others, the individual will be considered an employee only if he received earned income with respect to such trade or business and only the amount of such earned income derived from that trade or business shall be taken into account for purposes of the qualified plan.

Per Regulations: If an employee becomes eligible after the 90th day before the beginning of the plan year, the notice is timely if it is provided no later than the date the employee becomes eligible. So think about this in the context of a BRAND NEW plan. If the plan is effective 1/1/20, then ALL employees will be eligible on 1/1/20, which is less than 90 days before the beginning of the plan year. In which case, the notice just has to be provided no later than the date the employees become eligible (1/1/20). So, in other words, if it is a BRAND NEW PLAN, you don't have to apply the 30 day requirement. You just have to provide notice by the first day of the new plan year.

I'd say generally it is just another plan asset, but sometimes documents allow for loans to be carved out and treated as self-directed. Handling repayments in that scenario gets ugly and I wouldn't go there. No. As you note, everyone has to be given the same opportunity so you might be opening Pandora's box. At the very least consider restricting the source to deferrals, if that is enough for the owner.

This is not going to end well.