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Why? I mean assuming using the correct 2019 limits $30,000 pay $25,000 deferral (19K in 415 limit, 6K not part of 415 limit) $7,000 PS contribution. You get $26K in 415 limit which is less than 100% limit.

I agree. I'm guessing the question arises because of safe harbor notice requirements, and if I recall correctly, way back, it used to appear that you had to include language about how nonelective contributions were allocated, which might seem to preclude changes to said formula. But I think it became clear some time ago that we could just reference the SPD.

austin3515, the issue is whether the interest rate is reasonable. Because the plan uses prime + 1 for everyone else, and intended for this participant, prime is, at least arguably, per se unreasonable. This is not a qualification error or a 72(p) problem, but if the interest rate is unreasonable it is a PT for IRC 4975 and ERISA 406(a). Therefore you would need to correct in accordance with those provisions. The amount of tax owed under 4975 (15% of 1% of the loan amount, divided by 12 and multiplied by the number of months the loan has been outstanding) will almost certainly be too small to actually file the 5330. Probably just a few dollars. The DOL won't want you to do VFCP for such a small amount either. So just get the participant to agree to change the rate and your done. Participant can make up the lost interest in next payment, which again will probably only be a few dollars.

You have an over active imagination.

Agree with Lou. Then the employer needs to find a new investment advisor/recordkeeper.