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We're talking in circles....

Mike and ESOP Guy are correct of course. They must follow the terms of the plan document as written. The best way to get them where they want to be, assuming we are talking about 2020, is to make no contribution under the plan (assuming the amount is completely discretionary) and adopt a new plan retroactive to 1/1/2020 with an individual groups (a.k.a. "new comp") allocation formula. They can then merge the original plan into the new one later on so they are not stuck maintaining two plans forever.

And of course, make sure your plan document doesn't contain language requiring it to cover EVERY member of the controlled group. (There's nothing STANDARD about a standardized plan document!) 😁

If you cross test on a contribution basis it will pass easily with HCE 15%, HCE 25% and NHCE 25%. But as others have said you need a document that allows for varing rates of contribution and you currently don't have one.

Just because the plan document says new comp does not mean you have to cross-test. The allocation you're describing would pass the general test on allocation rates but you can't do it if your plan document doesn't allow allocations by individual groups.

There are always concerns when 412(e) is involved. Assuming the policy fully provides for the plan's benefit, from a qualification aspect the plan might be OK, but refer back to my first sentence above. The excess premium payments (aka contributions) might not be deductible. Furthermore, if the plan already provides for a benefit at the 415 limit, then there's no place for the money to go (refer back to my first sentence above). In 2004 IRS came out with all sorts of bad news for abuses in fully insured plans, up to and including "listed transactions" for buying insurance in excess of the plan benefits. I am not an expert in listed transactions and have no idea if this would apply here, refer to ERISA counsel and of course, refer back to my first sentence above.

You still need a plan with individual groups in order to vary the contribution by person.

You can fund the SEP for 2020 and establish the SIMPLE for 2021. No need to terminate the SEP; I'm not sure that has meaning. Just don't fund it going forward.

Is the employer contribution subject to a vesting schedule? Assuming the contribution is allocated correctly - in proportion to compensation - how much would the daughter actually get to keep when vesting is applied? If there are forfeitures, the forf amounts might be available next year, depending on the document provisions. Edit: Assuming the daughter is terminated and is taking a distribution of course.

As the plan is written you can't do it. You have to follow the terms of the plan. It seems like you could amend the plan to put everyone into their own allocation group and see if the tests pass. It would seem they would pass as it is one of the HCEs getting shorted. I agree with Mike 100% can't be done as described but someone should be able to get the document to a place that allows the plan to meet the client's goals.

Footnote 10 in Kennedy v. Dupon (2009) 129 S. Ct. 865; 172 L. Ed. 2nd may be of interest as well.

The tolling period is actually the earlier of 1 year or 60 days after declaration of the end of the National Emergency. Since the example is for a plan-based deadline (as opposed to an individual-based deadline like mid-year change in status) and the COVID-19 National Emergency has yet to be declared over, you just add 1 year to the original deadline. So, assuming the 30-day run out period for claims incurred in plan year 2020 means that normally, all claims must be submitted by January 30, 2021, due to the tolling period, the participants will have until January 30, 2022 to submit those claims. https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/disaster-relief/ebsa-disaster-relief-notice-2021-01 Just to be clear, you might be confusing the joint notice regarding the deadline extensions with IRS Notice 2020-29 and 2020-33. The extensions were not part of the CARES Act amendments and they are required, not optional like the provisions from the 2 notices. https://www.federalregister.gov/documents/2020/05/04/2020-09399/extension-of-certain-timeframes-for-employee-benefit-plans-participants-and-beneficiaries-affected

It would be disqualified. Outdated design. Needs a competent service provider.

Of course the presumption is that the new 401(k) plan will allow rollovers. If not, well, things are different. Nothing to correct in either event re: 1099's.

Yes, you can roll from IRA into 401(k). There is nothing to correct. There are two distributions here - one from plan A rolled to IRA reported by plan A and another from IRA rolled to plan B which will be reported by the IRA.

Way more information is needed. Don't assume anything at this point. For example, has this ownership been the same for all years, including 2017? Was company B acquired in a 410(b)(6)(C) transaction, so that a transition period might apply? Are all of the employees ELIGIBLE employees? Perfectly ok to exclude some or all employees of a Controlled group IF you can pass coverage testing. Based upon the ownership you give above, it would appear to be a controlled group now.

That's correct. Corrective distributions to correct 415, 402(g), or ADP/ACP failures cannot be qualified distributions. https://www.irs.gov/retirement-plans/retirement-plans-faqs-on-designated-roth-accounts