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If the employee is ok with it it's ok by me. The time involved to correct this would be ridiculous compared to the harm (none).

Look to the minimum benefit section of the plan. You want to insert language something like the following: there shall be a minimum cash balance hypothetical account established for partner 2 as of x date in the following amount (put in the amount you want).

Not without an 11g amendment.

Agree with Bird.

Yes, you need to follow terms of the plan. If they require the match then you should allocate and then address 415 correction according to the terms of the plan.

Yes this scenario is daily valued and can be 404(c) compliant.

404(c) is investment related. I don't see where vesting comes into play. And, I don't think daily valuation is a requirement either, just that the participant must have control over the investments. Nothing in there says that an investment be immediately under the control of the participant. The plan can impose restrictions on the frequency of changes. I believe the participants must be able to give instructions at least once every quarter. I think is was the "final" 401(k) regs that added the vesting requirements to the statements? Or, at least, something after EGTRRA. Here's the 404(c) reg: https://www.law.cornell.edu/cfr/text/29/2550.404c-1

In the unlikely event that you had no self-employment income in 2020 your election would mean nothing and can be ignored. In the alternative, what is the effective date of the plan? If it is 1/1/2021 or later, again, your election would mean nothing and can be ignored. In the alternative, if the plan was effective some date in 2020, but the document allows for a separate effective date just for salary deferrals and that date is 1/1/2021 or later, again, your election would mean nothing and can be ignored. Does one of these three scenarios fit your facts?

Excellent.

It's not perfect. I'd try to figure out the appropriate earnings, and transfer the excess+gain amount to forfeitures. Make the guy whole through payroll with some "negative 401k". And then use the excess (including those earnings) towards funding the new deferrals from subsequent checks. (So he doesn't specifically get the "benefit" of the market exposure on the extra amounts sitting in his account early.) Plan custodian may "freak" a bit about using the forfeiture account to fund deferrals. But that's not their problem.

Yes, you compare the 2019 ADP/ACP of the NHCEs in 2019 to the 2020 ADP/ACP of the HCEs.

The contributions will definitely be made to the plan, not the participant's IRA.

For 2020, any one who made more than $125,000 in 2019 is an HCE for 2020. This list can be restricted to the top-paid group with an election. In addition, anyone who owns more than 5% of the business at any time in 2019 or 2020 is also and HCE regardless of compensation or TPG status.

Nope. A one-time irrevocable election is NOT treated as a 401(k) election. 1.401(k)-1(a)(3)(v)