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Any solution that utilizes a qualified plan to direct additional amounts into Roth that would otherwise not be available through Roth IRA or 401(k) can be referred to as a "back-door" Roth. However, use of after-tax voluntary contributions typically works in only two situations: owner or HCE only plans where nondiscrimination testing is not needed or very large corporate plans with generous matching contributions that can satisfy ACP testing.

I am here to second what CuseFan stated. Another article has been written about mega backdoor Roth which is why most of the advisors I know are asking about it again. The VAST majority of 401(k) plans we administer have NHCE and it is always (ok, 99.99% of the time) only HCE that want to make voluntary after-tax contributions. The only plans where this has worked for us are in solo-401(k) plans.

It's in VFCP. The plan document probably also has some language about timing of deposits, so you can rely on the general principles of EPCRS to put the plan back in the same situation it would have been had the failure not occurred. Forfeitures can be used to reduce contributions, or allocated as an additional contribution. However lost earnings are not a contribution. I say you can't use forfeitures to fund lost earnings.

That is even more troubling... Where did the employees funds go if the check bounces?

The correction can't be rolled over to be clear.

And my coauthors' work in 403(b) Answer Book (Wolters Kluwer). For guidance on how a church plan or retirement income account might use wider investment opportunities than are allowed for other 403(b)s, it's in my Investments chapter.

Without knowing or remarking on the particular situation you describe: The Internal Revenue Service allows a method for a claimant to self-certify her hardship without submitting source documents as a part of the claim. Instead, a plan’s administrator or claims administrator relies on the participant’s written statement (made under penalties of perjury). A claimant must pledge to keep her source documents, and to furnish them if asked. But a participant’s breach of that promise won’t tax-disqualify the plan if the plan’s procedure is correctly designed and administered. Internal Revenue Manual 4.72.2.7.5.1 (08-26-2020) https://www.irs.gov/irm/part4/irm_04-072-002#idm140377115475856 The IRS’s without-source-documents method can work if the plan’s administrator and its service providers carefully meet all conditions of the regulations and that method. Under that method, an IRS examiner must not ask for source documents unless: (1) the notice to participants or the claim “is incomplete or inconsistent on its face”; or (2) some participants received at least three hardship distributions in a plan year, there is no “adequate explanation for the multiple distributions”, and the examiner’s manager approves the request for further information. If a plan’s administrator and its service provider design the software correctly, #1 would never happen (except for a paper claim, and then only if the claims administrator is careless). About #2, a plan might limit hardship distributions to no more than two in a year, making #2 not happen. Even if the plan does not limit the number of hardship distributions, #2 might not happen unless abuses are bad enough that the examiner is motivated to do the extra work of getting her manager’s approval. Yet, there is a divergence of opinions about whether it’s wise to use what the IRS calls the summary-substantiation method described in the Internal Revenue Manual. A search in these BenefitsLink forums will turn up a few discussions that air different views.

This reminds me of a plan sponsor who told me that he had a participant insisting that they offer tax-sheltered annuities (the investment products, not the actual annuities) in the 401(k) plan because they had read so much about what a great thing they were for retirement savings. But this example is even worse because the person would be converting a product with a tax-free "output" into a taxable output (at ordinary income rates).

Anybody up for creating a collaboratively-written questionnaire to send to the plan sponsor each year along with the employee census form, including questions to find any demographic changes in attributed ownership (e.g., the plan sponsor's owner got married to an employee during the plan year)? I haven't done such a collaborative document before, but I've always wanted to give it a go, as an employee benefits community project. Use Google Docs? Anybody used anything better for such a project?

Different parts of the plan can have different eligibility conditions. It can create some of the issues you discus in your original post. But if someone wanted to they could have something crazy like immediate eligibility for deferral, 3 month eligibility for safe harbor match, 6 month eligibility for non safe harbor match and 1 year of service for profit sharing. As long as the document was drafted correctly. I mean I'm not sure the added complexity would be worth it but if you aren't top-heavy and don't have owners with less than a year of service it's likely to pass all discrimination tests without a problem. There are some issues if you have a very high paid employee who becomes an HCE the 2nd year because they made over the limit in just a couple of months, you hire someone who immediately is a more than 5% owner in the first year (usually an owner's kid or spouse). But generally speaking everyone in your under 1 year of service group is going to be all NHCEs which will automatically pass for that group. If you are top-heavy, you'll lose the "deemed not-top-heavy" exemption with this kind of design so probably not ideal in the very small plan market in most cases.

@Christine ZinterThe standard HIPAA special enrollment right to enroll as of the first of the month following the special enrollment request would apply if the 30-day window did not run before the start of the Outbreak Period on 3/1/20. The retroactive enrollment would apply only for birth, adoption, or placement for adoption. Summary here: https://www.theabdteam.com/blog/hipaa-special-enrollment-events-2/ Here's the relevant cite: 29 CFR §2590.701-6(a)(4): (4) Applying for special enrollment and effective date of coverage. (i) A plan or issuer must allow an employee a period of at least 30 days after an event described in paragraph (a)(3) of this section to request enrollment (for the employee or the employee's dependent). (ii) Coverage must begin no later than the first day of the first calendar month beginning after the date the plan or issuer receives the request for special enrollment.