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I forget the exact wording in the rule but isn't it the deposit is late if not done as soon as administratively possible? Can a case be made the blackout makes it not possible until over? I am asking not arguing this position. It has been a long time since I did any daily 4k work but it seemed like all the plateforms would take deposits and put them in a money market fund until they could be split back in the day to solve this.

I have seen both, it really depends on the situation and the platform. Yes, that is the correct way to handle it. Are they, or will they be, beyond the 15th of the month following before it can be deposited? I think this is one of those situations where you could argue that you were still timely before the 15th of the month following, but I would still prefer to segregate assets into a plan account.

No.

Gilmore, I am going to take a stab at this.... From a practical sense, I think the two tiered hypothetical is dumb. Generally, the employer is trying to get participants to defer to help pass testing. This doesn't help. It gives the appearance of the employer trying to be cheap and getting one over on the rank and file. I'd be doing my best to put this hypo down in a hurry. And if this was all good to go.... calculating the match on the 5th and 6th%..... ugh, no thanks. From a plan perspective, it could be an effective availability issue. What if the NHCEs don't defer over 4%? What if the HCEs all defer to 6%? Seems like a BRF issue kicks in. And the BRF could change every year. Tell the employer to do a .25 match on the first 4%. Keep it reasonable and simple. The above tier is not reasonable or simple. My two cents.

Did the S-corp pay the shareholders' medical insurance? I believe this is properly included on the W-2 for more than 2% shareholders. It's probably not enough to get them much of a plan allocation though. But if they/their CPA didn't know that 1120S K-1 is not plan compensation, they might not be reporting the medical properly either.

Sounds like the screwed themselves. I would suggest you have a discussion with the accountant for their firm and ask him/her what they were thinking by not paying income. The accountant should know that is a Bozo No-No, and if he/she doesn't, he/she should be fired. Is there a chance that they are not actively involved in the operation of the business and that's why they don't have a W-2? And if that is the case, then they also are not employees and can't be in the plan. Let us know what you find out.

Isn't the "original sin" on Congress? Instead of reasonable penalties they do things like: Miss an RMD the correction and maybe pay a small penalty, if you want interest on the missed payment to the government. Nope it is a 50% excise tax no one at the IRS wants to impose because it is draconian. No one wants to tell a retiree on a fixed income becasue someone didn't compute the RMD right they have to pay $1,000 of the $2,000 that should have come out of their 401(k) account to the IRS. So they came up with VCP to fix it for a reasonable cost and penalty waiver. Or because one of what seems like an endless list of things that can go wrong on the client's or the TPA's side of things the plan doesn't simply make a correction to get people back to where they would be and maybe pay a small fine because of an error.... Nope it is the plan is technically disqualified. I have ESOPs that have 100s of millions in assets in them and if you read the rules literally when the disqualifying defect happens all those assets are now taxable and oh those 500 distributions you paid last year and the year before that figure out which ones went to an IRA that money shouldn't be in the IRA even though those people had nothing to do with the error. So once again the IRS has simply come up with a more reasonable way to deal with this. Yes, add to it my understanding is the IRS has less employees working for it than it has in decades because of budget cuts by congress and the POTUS and sure you have a mess. But Congress could have come up with a realistic set of penalties and corrections most of which could be handled as self corrections with maybe a form paying a penalty. The IRS could choose a sample of them to make sure people are doing it right.

I know I am due to update my vision prescription, but the two listed names look the same to me.

This reminds me of my most glorious case. A local fellow in Florida had been sent the wrong version of an SPD for a welfare benefit plan, after he had asked the HR department to send him an SPD. It said he would get a benefit if he met "X" conditions described in the SPD. So he quit, relying on the fact that he had met those conditions. His claim for benefits is denied. "But lady..." he says. -- "Sorry, bud, that's not what our SPD says", they say. "But mine says..." he protests. -- "Well, that's not the current version. You're looking at an old version" they respond. -- "But lady, then you must have sent me this old one when I asked you to send me an SPD, just before I quit in reliance on what I had read in the booklet." HR responds, "I don't think that happened, sir. You must have had an old version already that you got mixed up, and, frankly, we can't honor your claim because we would be vulnerable to fraudulent claims by people who say they are in a similar situation. You'd need to be able to prove that you were sent the old version." He comes to see me. I meet with him, take the stamped envelope in which the SPD came, hand-addressed to him by the HR department. I tell him this will be a tough one, and I'll get back to him. I write a long letter to the plan administrator, complete with the law on detrimental reliance (which basically shoehorns these claims into an "interpretation of the plan document" theory -- which is weak, but it often worked, ironically due to an SPD case I had argued and won in the Eleventh Circuit, which I "mentioned" in my letter). I get a response that's basically what he had been told, again saying the plan formerly included the conditions he says he's relying on, but frankly they can't honor a possibly fraudulent claim and there's just not enough evidence here for the plan administrator to grant the claim. A few days later, I'm looking at the file again. The sunlight from my south-facing window catches the shiny cover of the SPD. I tilt the booklet at an angle and behold -- I see an impression of the client's name and address, essentially embossed in the shiny cover of the SPD. The person in the HR department had used a ball-point pen that had pressed through the envelope and onto the SPD cover, where there was an exact copy of the name and address that had been written on the date-stamped envelope. So the envelope matched the SPD, proving the old version had been sent to him on the date of the postmark on the envelope. I write to the plan administrator and tell them what I've discovered. They grant the claim. I should find the 20-year-old file and confirm that I'm remembering all the facts accurately, but this is the gist of it. Or how I want to remember it, anyway ? The client was enormously grateful, and the "extra" benefit made a huge difference in his quality of life.

Things have taken a dark turn. Let's turn back a bit. The IRS is unlikely to challenge compensation to an owner's wife of less than $30,000 as unreasonable even if the only work is "pillow talk advisory" in nature. But I agree, it sounds like an excess that must be corrected. Unless the last payroll was an error and it should be re-run in which case maybe it isn't an excess at all!

I think this can be self-corrected as an "Excess Allocation" under Rev. Proc. 2019-19 sec. 6.06(2). You would remove the money from the spouses' accounts and put it in an unallocated* account. No further employer contributions may be made until the money in the unallocated account is allocated to participants. *The unallocated account is similar to a forfeiture account but is not actually forfeiture. For example, true forfeitures may be used to pay plan expenses, but this unallocated account may not.