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And remember, the expenses have to be reasonable. Not gonna pay someone $5,000 to put together census data for a 50 person plan. (and if they really want to pay that much, send them my contact info. I'm free on weekends to help out.)

Actually, I think all of the documents I have written or otherwise encountered do specifically contain this or a similar statement, such that it is not left to subjective interpretation. I'm surprised by the other responses.

The key takeaway is that attribution is now taken into account when determining who is an owner of an S-corp for 5500 filing purposes. If everyone covered under the plan is deemed to own at least more than 2% of the S-corp sponsoring the plan, then the plan is considered a one-participant plan and should file Form 5500-EZ. This only applies for S-corps and not any other types of organizations.

I'm just speaking off the cuff here without looking into it further - if your pan has this "fail safe language" then I think you are stuck. But if it doesn't have such limiting language, it seems to me that 11(g) doesn't limit you in such a manner. Perhaps the corrective amendment (which would most likely be nondiscriminatory - I assume you are talking generally about NHCE's) could say you will remove the allocation conditions for all participants who worked more than (x) hours - or something along those lines. Don't know if others will agree - again, this is without any investigation on my part. Caveat Emptor!

And I would just like to mention that something allowed is not necessarily the smart move due to the administrative difficulties and potential for error.

I agree, there is nothing directly on point in the Treasury Regulations, but different vesting schedules for different contribution sources is not a new concept, as you point out.

The vesting regulations are so very old that they don't have (to my knowledge) provision specifying how they apply to a defined contribution plan with various contribution sources: elective deferrals, match, employer nonelective, QMAC / QNEC, safe harbor contributions, and possibly further subdivisions as defined in the plan document. On the other hand, we "know" (or at least its a universal consensus view) that one can have different vesting schedules to some extent for these contribution sources. So I lean toward yes, that one can preserve the two-year cliff vesting schedule for QACA SHNE without having to switch it to a traditional SHNE. I wish I could cite a regulation that gives me 100% confidence in the answer.