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Agree with Austin. But you can strip all kinds of recordkeeping fees out and pay them directly to get the actual fund fees down to a few bps for index funds and maybe 30 or 40 bps for managed funds (not starting a debate on which is better).

The ability to have different investment directions for non-Roth and Roth and/or different sources is baked into most recordkeeping systems. After all, once it's coded, it shouldn't be a problem. The challenge and difficult conversations come up when the participant decides to invest the assets differently and then wants to split the assets up between non-Roth and Roth to move forward. Of course, they always want the best performer to be in the Roth side of the equation. So to answer your questions above.... maybe typical, maybe not. I've worked at a company that opened the sources to different investing. I'm currently at a place that does the one investment strategy for all sources.

If a plan permits a participant (or other directing individual) to specify different investment directions for non-Roth and Roth subaccounts, some will use that opportunity. Some advisors and authors suggest ordering one’s investment allocations to take advantage of the different tax treatments. Here’s my related question: Which recordkeepers and service arrangements facilitate separate investment directions for non-Roth and Roth amounts?

I think it would definitely part of the accrued benefit. When you allocate excess assets, you are essentially increasing everyone's accrued benefit, that is why you need to test it for non-discrimination. Either way, better safe than sorry. Just amend the plan to state that the accrued benefit can exceed $3,500 if it is the result of the allocation of excess assets at the time of termination.

What happens if there's J&S and the participant does not complete the paperwork on time?

I think you answered your own question. Ned gets them.