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Sorry for 3 comments in a row but these were separate thoughts. Back to the original question. (I am a bit of a story teller so here goes) If you are unhappy find a way to fix it. In the early '90s the company I worked for changed ownership. I went from loving my job to hating it. I was slow to leave as I was making good money. I had great health insurance, a pension plan, a great 401(k) plan..... I am the breadwinner for my family. So I stuck it out for years for my family. I was bring it home however. It was stressing me, my wife...... In the end they froze the pension and laid me off in 2009. I landed on my feet quickly. I look back and realized they did me a favor. I was hating my job and life for money and benefits. You spend too much time at your job for too many years to hate it. You owe yourself and maybe your family better. Find a way to stop hating the current job or get one you can not hate. Sorry if I am stating the obvious but some times in these situations being told the obvious is a favor.

Particular Investment options are not a protected right under ERISA, FWIW.

I don't see any 409A issues there. But I don't like it for other reasons, particularly if there are no time limits. Do they want to have an outstanding obligation to the former director for an unknown period of time? Right now they may feel he or she deserves a piece of the pie if there's a CIC, but will they feel that way in 5 years? Even if they think a CIC is likely in the near term the situation can change . That said, I have seen it done before, despite my feedback.

Also, if the plan is providing a 3% SHNEC, then it satisfies the top heavy contribution requirement. So what's the concern??

I know this is a side track, but this is also where detailed time tracking comes in. As much as I still hate the task of accounting for every 6-8 minutes spent on a client, you need it if you are going to hit 2.5-3X. You have to know how much time you spend on the different tasks so that you can charge accordingly and train accordingly. If admin A takes twice as long on simple corrections as Admin B, maybe Admin A needs more training, or maybe a specific task should be centralized to a small group of employees. Most importantly though, are we charging an appropriate amount for task XYZ.

If the plan year consists of only deferrals and the safe harbor contributions, the plan is exempt from making the top heavy minimum for that year. Or to say another way. The plan is still top heavy but is not required to make the top heavy minimum. The top heavy testing doesn't go away.

We post the plan documents on the website for the plan sponsor/financial adivisor and the SPD for the participants/sponsor/advisor. We also post the last three 5500 forms and the annual plan testing for the sponsor/advisor and the SAR for all parties to the website. We then direct them to the web to find the data.

In the context of the original question, if your rounding method gets you to 1 or more, then at least theoretically ok. However, there are potential document and timing issues with the timing of the "election" and whether you can simply "elect" it or must amend plan, possible anti-cutback provisions (although I would say that's generally unlikely) - facts and circumstances issues to be determined for each plan.

@dmwe Yes, I agree. My position is the excess contributions (i.e., amounts contributed in excess of the reduced cap caused by the NDT) are no longer dependent care FSA balance amounts. Therefore, any amounts not already distributed prior to the reduction need to be directly returned or made available without the need to submit qualifying dependent care expenses. Here's a summary: https://www.theabdteam.com/blog/failing-dependent-care-55-average-benefit-test-2/ Excess Contributions Not Distributed: Refunded as Taxable Income or Recharacterized as Taxable Income The amount of HCE contributions in excess of the reduced limit that have not yet been reimbursed to the HCEs must also be made taxable income before the end of the year. There are two possible approaches: Refund/Return: Have the TPA refund the excess contributions to the company (skip if amounts are not held by the TPA), and then the company will distribute the excess back to the HCEs through payroll as standard taxable wages included in gross income and subject to withholding and payroll taxes by the end of the year. Recharacterize: Recharacterize the excess contributions as taxable income in the same manner as the excess distributions. Then inform HCEs that they may take a distribution of the excess contributions (which no longer have pre-tax status) from the FSA without the need to submit qualifying dependent care expenses.