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You said that you only had $8000 in in the plan, so a return wasn't needed at all, unless you had employees. My thinking was that an amended return couldn't be late since it isn't required. But I guess they could say "gotcha - it's optional but you chose to file and your optional return was late." (But you haven't actually filed?) If you already did the DFVC filing then that should take care of it, but I think a case could have been made that you didn't need to file at all and just decided to stop your optional filings. I'm a bit all over the place because I'm not sure about the fact pattern but it appears you created a problem by trying to do things yourself and are now trying to fix things yourself and maybe you are being penny wise and pound foolish.

Yes. This means my interpretation is right. As soon as someone gets to 1,000 hours, they are eligible. They don't wait until finishing the 12 months. This has yuck all over it. Just because something is legal doesn't mean it is a good idea.

I don't see how the ADP test is failing (so badly). You would run the ADP test for the people who are not fully covered by the SH, you don't have to run an ADP test for the whole plan. The people who defer and cannot get a SH will almost be eligible to be tested separately. And unless you have a bunch of newly-hired HCE owners or family, that otherwise excludable group will pass. If you have an owner HCE, then hopefully it won't fail that badly.

I would contact the attorney who drafted the document.

On July 30th, the Internal Revenue Service updated the retirement plan COVID Q&A on their website to clarify that an individual terminated and rehired in 2020 due to COVID is not considered to have an employer initiated severance from employment. It is unclear to me whether this guidance is only applicable for for COVID related severance and rehire in 2020, or is this the ongoing general interpretation for future years and other terminations/rehires (ie - due to sale of a business; closing of a plant; etc)? Q15. Are employees who participated in a business’s qualified retirement plan, then laid off because of COVID-19 and rehired by the end of 2020, treated as having an employer-initiated severance from employment for purposes of determining whether a partial termination of the plan occurred? (added July 30, 2020) A15. Generally, no. Subject to the facts and circumstances of each case, participating employees generally are not treated as having an employer-initiated severance from employment for purposes of calculating the turnover rate used to help determine whether a partial termination has occurred during an applicable period, if they’re rehired by the end of that period. That means participating employees terminated due to the COVID-19 pandemic and rehired by the end of 2020 generally would not be treated as having an employer-initiated severance from employment for purposes of determining whether a partial termination of the retirement plan occurred during the 2020 plan year. See Revenue Ruling 2007-43 for more information on partial terminations, including vesting rules, how to calculate the turnover rate for employer-initiated severances, the presumption that a turnover rate of at least 20 percent during an applicable period results in a partial termination, and how to determine the applicable period. https://www.irs.gov/newsroom/coronavirus-related-relief-for-retirement-plans-and-iras-questions-and-answers#:~:text=In general%2C section 2202 of,to qualified individuals%2C as well

I agree with Luke and I'm not a CPA either. However, the NASPP newsletter (Barbara Baska) has a good example of how accounting works if a partially vested option upon termination of employment is accelerated and becomes fully vested. It's not treated a a new grant as to the portion of the award that has already vested. It is a new grant as to the newly vested portion. Here's her example: "Sa that an employee terminates while holding an award to purchase 10,000 shares that is 75% vested, and the company modifies the terms of the award to accelerate vesting on the remaining 2,500 unvested shares. Further assume that the fair value of the award at grant was $10 per share, and the fair value at the time the modification occurs is $16 per share. The fair value of the vested portion of the option is $75,000 ($10 per share multiplied by 7,500 shares); this expense has already been recorded and is not reversed. The original fair value of the unvested/accelerated portion of the option was $25,000 ($10 per share multiplied by 2,500 shares). Let’s say that the termination occurs after one-fifth of the last vesting period has elapsed, so that the company has already recognized $5,000 of expense for this tranche (assuming straight-line accrual and that the company accounts for forfeitures as they occur). The $5,000 of expense that has already been recognized is reversed and the remaining $20,000 of expense is never recognized. The fair value of the unvested/accelerated portion of the option after the acceleration is $40,000 ($16 per share multiplied by 2,500 shares); this amount is recorded as expense in the period in which the acceleration occurs.