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Thanks for reading carefully Mike. Otherwise excludables would not have to receive the gateway, assuming that there are no otherwise excludable HCEs. They do have to get the TH minimum, although if they are not eligible for the DB plan then they would only have to get the DC TH minimum.

A plan is exempt from the top heavy minimum if it "consists solely of" deferrals and match which satisfy the ADP/ACP safe harbor. IRC 416(g)(4)(H) If you have participants who are eligible for deferrals but not for safe harbor, then that portion of the plan is not satisfying the ADP safe harbor (the portion of the plan covering otherwise excludable employees is subject to the ADP test, but generally passes automatically as long as there are no HCEs). Therefore the plan as a whole no longer qualifies for the TH exemption.

Might the fact that the legislation specifically indicates that this is NOT an eligible rollover distribution have a bearing on the discussion?

Now that you have clarified, it looks like your best bet is to go back to whoever issued the 1099R with 1L as the code and try to convince them it should have been 1M due to the fact that he was terminated. It should be a simple matter to issue an amended 1099-R once you convince them the existing 1099R is wrong. The tricky part will be convincing them it is wrong.

It is a safe harbor definition to exclude deferrals. Deferrals includes sec. 125 deferrals (which includes pre-tax HSA contributions) and also 401(k)-type deferrals. If you excluded just sec. 125 deferrals but not 401(k) deferrals it would not be a safe harbor definition.

You are correct; there is nothing that makes this unacceptable so far. Of course, we could always get some more "guidance" that we won't like, but so far this one is not (apparently) on the table for discussion. That can change. As to what they had "in mind" when they drafted the CARES act, I would not be so bold as to suggest they were even in their right minds when drafting this monster!!!!!

1.416-1 Q&A M-12 provides the TH alternatives for an employer who maintains both a DB and a DC plan. 1.401(a)(4)-9(b)(2)(v) contains the combo gateway rules.

The only authority would be to request a coverage determination from the PBGC - which is a fairly painless process, actually. It can also happen when you have the benefit for a group defined as 0, or if you have employees who met the plan's entry requirements, but never satisfied the hour requirement to accrue a benefit in any year. In both of those cases I think you still have to count them as active.

I think all plan participants (and beneficiaries) have to fall into one of 3 categories: active participants, retired receiving benefits, and terminated but entitled to future benefits. Any participant who is neither retired and receiving benefits, nor terminated and entitled to future vested benefits, would have to be an active participant. If there is any doubt, request a coverage determination from the PBGC.

Purplemandinga, completely agree with CuseFan on substance, but note that CuseFan is not in fact saying the plan does not have to be amended, just that it does not need to be amended either immediately or permanently. It does need a temporary, or "pop-up" amendment, as it were, adopted by the end of 2022, but effective only for 2020.