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You could be top-heavy for first year as well.

No. Yes.

The Labor department’s nonrule Interpretative Bulletin (cited above) arguably tolerates a contribution of property made with no obligation: “For example, where a profit sharing or stock bonus plan, by its terms, is funded solely at the discretion of the sponsoring employer, and the employer is not otherwise obligated to make a contribution measured in terms of cash amounts, a contribution of unencumbered real property would not be a prohibited sale or exchange between the plan and the employer. If, however, the same employer had made an enforceable promise to make a contribution [even a profit-sharing contribution] measured in terms of cash amounts to the plan, a subsequent contribution of unencumbered real property made to offset such an obligation would be a prohibited sale or exchange.” Under that view, a contribution of property other than money might not be a prohibited transaction if treated as a discretionary nonelective contribution about which no written or oral promise had been made. I express no view about whether that Interpretive Bulletin is a correct, or even permissible, interpretation of the statute. A contribution of property other than money that purports to meet a funding obligation to a pension or money-purchase plan, or an obligation (however made) to a profit-sharing plan, is a prohibited transaction (and so does not satisfy the obligation).

I think (and I say think, cause I'm not sure - the SECURE Act confused this stuff, and I've been fortunate enough not to have a real case yet) that there is no RMD. Assuming the spouse is the 100% beneficiary, I believe the surviving spouse can roll over the entire amount, and does not have to take RMD's until 12/31 of the year the participant would have attained age 72, even though in this case that means no RMD's until the surviving spouse is about 87. Seems like a crazy result, but that's my "memory" on this. But, as I said, that's based on memory and I haven't specifically researched it. Probably wrong...Good luck!

You can exclude reasonable classifications of employees provided you pass IRS nondiscrimination testing. Typically 410(b) coverage in this situation. I believe an exclusion of "less than 30 hours per week" is not considered a reasonable classification by the IRS and is not allowed.

The participant has not reach RBD so no RMD is due for 2022 under any set of rules that I'm aware of, if the product insists, have them produce a citation for their position that is more than "because we said so". What the plan allows on death and what elections the spouse makes will determine when RMDs must start for the spouse. My memory matches up with Belgarath with pretty much the same caveats about SECURE Act changes possibly clouding the issue. I "think" to extend the RMDs as long as possible the spouse could roll the funds to an Inherited IRA and delay RMDs until the participant would have reached age 72. I believe this part of SECURE changes is the same as pre-SECURE for spousal beneficiaries. If she elects to treat the IRA as her own, then RMDs would begin the first year following when she has a balance on 12/31 of the preceding year. So if she roll it to an IRA in 2022 in her name, then RMDs would start in 2023. If the money is left in the Plan, RTD on options available and payout timelines for beneficiaries.

That would probably be acceptable under EPCRS self correction, but it would require adding ROTH for all purposes and the client may or may not want to do that.

If the receiving plan can't accept the funds how does the new custodian have authority to issue to another institution? How does a participant make that election from a plan that isn't actually holding the assets? Issuing to a Roth IRA would need to generate another 1099R, correct?

The first question(s) would be "why" (and "what")? To avoid commissions? Not worth the risk. Because it is a hard-to-sell asset, such as real estate? No way. And doing it from a personal account is a definite no.

While you can do this, it's asking for trouble. What will happen is the business owner will sign a 401(k) plan on 12/31 and then go and issue themselves special payroll with some 401(k) deferrals on it. Presumably no one else gets the opportunity to receive some extra pay that they can all of a sudden contribute to the plan. Even if you cook up a way to pass the ADP test (like the one Lou described using prior year testing), you still have a nondiscrimination failure on the availability of the deferral feature. If you are going to put in an 11th hour 401(k) plan, make sure you get deferral elections out to employees, and early enough that they have an effective opportunity to defer.

Is this actually a plan termination? (You say "One of the terminating plan" - rather odd phrasing by the way - so if in fact the plan is terminating, then you have a distributable event and it just goes away as a loan offset at that point). Or is it a merger of plans, or is the acquiring company taking over the old company and its plan? If the latter, I'm not sure they can refuse to take it. (For that matter, if it is the former, I don't see how they get to refuse to accept it.) It shouldn't be a big deal in either event; it's just a phantom asset which, as noted, is only maintained on the books for purposes of limiting future loans. It can be offset (distributed) if there is a distributable event, which depends on the nature of the plan transaction.

I just wanted to make sure I was correct. Cash Balance Plan is terminating as of July 31, 2022. In order to calculate the 2022 requirement, they can maintain the 1,000 hour requirement correct?

Vesting is typically granted under a DOL's regulation, where you end up with overlapping full 12-month measurement periods, rather than a proration of hours. Accrual requirement hours are usually pro-rated, though. And eligibility wouldn't typically prorate, but that could be addressed in the amendment creating the short plan year if the sponsor wants to cram more people in sooner than otherwise would be typical.

However, if the plan wasn't terminating and the plan year was amended, a 1,000 hour requirement for accruals, eligibility, and vesting would need to be prorated for the resulting short plan year, right?

These are great questions and like the others I'm not sure there is an answer to most, but I believe that if you can find your way to making the distribution (a) the amount is includible in the participant's income, whether they cash the check or not, and (b) you can withhold the default amount if they have not made a withholding election. See Rev. Rul. 2019-19. Since the plan is required to comply with 401(a)(9), in the absence of more specific language, I would probably advise distributing the smallest amount that could be distributed under any of the benefit options and then periodically sending the participant a letter that they can elect a different election and the actuarial value of the distributions already made will reduce the amount available for distribution after the election.