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EE is 100% vested.

Bill is 100% correct. He became eligible on his date of hire and immediately 100% vested. Any reduction from 100% would be a prohibited cutback under 411.

Depending on the type of services provided by W's company, couldn't this be a management services group under 414(m)(5). The statutory provision is in effect, even though regs were withdrawn. Need to consider, I think.

There is no minimum offset, but the offset should be Uniform in order to test 401a26 pre-offset. The 5% is simply a convenient level in order to pass TH minimum benefit requirements.

Great question because different sources will take different positions on this one. My position would be that because both employee groups are eligible for the cafeteria plan (i.e., the ability to contribute the employee-share of the premium on a pre-tax basis) immediately upon becoming eligible for the underlying health plan, there is no violation of the Section 125 NDT requirements under §125(g)(3)(B)(i). In other words, they are both immediately eligible to contribute pre-tax upon becoming eligible for the health plan, and therefore they actually have the same condition of enrollment for cafeteria plan purposes. I don't view the 125 eligibility test as intended to look-through to the underlying health benefit components for which the POP is used to make employee pre-tax contributions. Otherwise, a huge percentage of employers would technically be violating the Section 125 eligibility test component of the NDT rules because it's so common to have different employee groups with different health plan eligibility conditions. My take is that there are other provisions designed to address the appropriate timing of offering coverage underlying the health plan, including the ACA employer mandate, the ACA 90-day waiting period rule, §105(h) for self-insured plans, the ACA nondiscrim rules for fully insured plans if they ever take effect, etc.

I don't see what it accomplishes. You can't change the fact that it was deposited to a properly titled plan account in the first place. You might even be drawing attention to a (possible) problem if someone ever looked at the paper trail. I'm not sure it is in fact a problem but in no way does this actually fix it.

Jakyasar, maybe someone else will think differently or have more specific experience, but if the money was deposited into an account in the trust's name over which a trustee has signature authority, I would be careful. Don't know exactly what you have in mind by "redo."

So Jakyasar, you're talking here about a non-401(k) plan (no employee deferrals), and presumably the employer was on extension for its return, so they/you are using the ability under SECURE Act change to adopt a plan retroactively, right? I assume a noninstitutional trustee (e.g., the company owners), because most likely a bank or other institution would not have allowed opening the account in name of trust without document. I would say: (1) To some extent the issues posed are novel, since the SECURE Act change is new. (2) Once they signed the plan documents, you certainly have a trust and I think you'd potentially run into more trouble if the trustee tried to take the money out now, and then put it back in. (3) I guess the IRS could argue that the trustee owes taxes for the period from 5/23/2022 to 6/3/2022 (a little over a week), since the money was not in a qualified trust. But as long as the total allocations for 2021 don't exceed the 415 limit, don't see how you would have a qualification issue. (4) In the small corporation setting, when issues like this have been dealt with on audit or determination letter process, sometimes lawyers will argue successfully to the IRS that since the individual who made the deposit was a 100% shareholder, or if all the directors were aware of and had approved the deposit in some way, the plan had been adopted. In theory the success of this approach depends on what the plan documents say. If you're lucky, (a) the plan document won't say that it is not adopted until signed, but rather will just say it needs to be "adopted," and (b) the corporate resolution that was provided will authorize the officers to "sign such documents as are deemed appropriate to carry out the purposes of these resolutions, etc." (5) You could always put a memo in the file saying that you had talked to the employer and the appropriate body (board, sole proprietor/boss, partners) had considered the plan's adoption and decided to do it before the deposit was made, assuming those are the facts. Not saying that would be bullet-proof if this was $1 million and someone had it in for this employer (e.g., the business is about to go bankrupt and the employer is trying to put money our of a creditor's reach), but it could help, e.g. in an exam. The issue could certainly be spotted in an exam, because the IRS always checks dates of documents. But absent unusual circumstances this does not seem like the sort of thing an agent should be upset about, especially given that the SECURE Act provision is so new. Sure, would have been better to sign the documents first.