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This forum is full of stories from people who tried to do it themselves and ended up fouling things up. Of course, if there are any business owners who are successfully administering their own plans, they probably aren't coming on here to tell us about it, so you do kind of have a self-selecting group. That said, I would strongly encourage you to hire a TPA. For a one-member LLC with no employees, you won't have any testing and won't even need a 5500 until combined plan assets go over $250,000, so prices should be pretty reasonable, and you have the confidence of working with an expert who knows all the rules. For the cash balance plan you are required to use the services of an enrolled actuary even if you don't have to file anything, so there's no doing it yourself with that one. If you can tell us where you're located, I'm sure someone on this board will know a local TPA who can help you. Our company for example does administration for dozens of owner-only and micro-sized plans so there are definitely firms out there who cater to your market.

I realize that Rev. Proc. 2019-19 only includes QNECs as examples of correction, but in this case it sounds like the ADP test was actually correctly run and the distribution was set in motion by the plan administrator, but not made because of administrative error, which I think arguably makes this situation different. You're not correcting an ADP test failure, but rather the custodian's failure to follow the plan administrator's direction. Was supposed to be done March, 2020, so apply SCP and distribute now and pay the 4979 10% excess tax on the excess amount. You asked for creative and brilliant. This is at least creative. 🙂

Sometimes you have to read between the lines, but the answer will be there somewhere. Start with the DB plan - it has to say somewhere to which plan the top heavy contributions will be made. If it says to the DB plan then you are stuck with the 2% accrual. If it says to the DC plan, then you have to go and look at what the DC plan says. If the DC plan allows for top heavy minimum contributions to be made on behalf of the employer's DB plan, then go ahead and make the 5% to the DC plan. If the DC plan doesn't acknowledge the DB plan for top heavy minimums, but it doesn't have a last day allocation condition for profit sharing, then you can still make the 5% to the DC plan, just call if profit sharing. If the DC plan does have a last day condition, then you will probably need to do an -11(g) corrective amendment to waive the last day condition for those employee(s) entitled to the top heavy minimum.

I would suggest even though someone becomes a participant on the day they satisfy the eligibility requirements, their actual entry date is the first pay date after that.

After a 6 months wait, I am glad to report that the IRS sent me a letter informing me that they have waived the penalty entirely! Thank you for all the help!

Personal opinion, others may disagree - but to include in ADP the person must be eligible to make a salary deferral for the year. Yes, technically the person may have entered the plan but since they were not eligible to defer any pay for the year I would exclude from testing. Re 5500, I would treat the same to be consistent, but it probably doesn't matter unless it's the difference between 120 and 121 total participants. Also personal opinion, this is poor design. Immediate eligibility is fine, but knowing payroll is once a month on the first, why not make plan entry date the first of the month coincident with or next following date of hire? Administratively the same but avoids the confusion of your situation. And double check the document that it's not already like that - you mention no eligibility requirements but eligibility and entry are separate, albeit related, concepts.