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My recollection is that years ago if the plan was considered a "multiple-employer plan (other)" you had to use plan number 333. That requirement apparently has been dropped, but the current instructions from Form 5500 state..."If Part II, line 8a is completed and 333 (or a higher number in a sequence beginning with 333) was previously assigned to the plan, that number may be entered on line 1b."

RR 2002-84 says the miscellaneous itemized deduction subject to 2% of AGI floor (which was eliminated by TJCA 2017 for the next few years) only applies if the repayment is < $3,000. If the repayment is greater than $3,000, then the taxpayer can still file for a claim of right adjustment under 1341 (which was not affected by TJCA).

I'm one of those who takes the position that this probably isn't a Section 125 eligibility test violation. But accepting the premise that it does violate the rules, I read the regs to say that all HCEs would have all cafeteria plan pre-tax contributions for the full plan year recharacterized as taxable income. I think there would likely be a standard three-year statute of limitations for going back to prior years and issuing corrected Forms W-2c. Prop. Treas. Reg. §1.125-7(m): (m) Tax treatment of benefits in a cafeteria plan. (1) Nondiscriminatory cafeteria plan. A participant in a nondiscriminatory cafeteria plan (including a highly compensated participant or key employee) who elects qualified benefits is not treated as having received taxable benefits offered through the plan, and thus the qualified benefits elected by the employee are not includible in the employee's gross income merely because of the availability of taxable benefits. But see paragraph (j) in §1.125-1 on nondiscrimination rules for sections 79(d), 105(h), 129(d), and 137(c)(2), and limitations on exclusion. (2) Discriminatory cafeteria plan. A highly compensated participant or key employee participating in a discriminatory cafeteria plan must include in gross income (in the participant's taxable year within which ends the plan year with respect to which an election was or could have been made) the value of the taxable benefit with the greatest value that the employee could have elected to receive, even if the employee elects to receive only the nontaxable benefits offered.

If the employee was a participant on 1/1/21, then SF

I'll address your second question first. With respect to coverage testing, Treas. Reg. 1.410(b)-8(a) provides that plans may satisfy the coverage test using a daily testing option, a quarterly testing option, or an annual testing option. In practice, most plans will satisfy coverage using the annual testing option, but the other options may provide better results in certain circumstances. For nondiscrimination, Treas. Reg. 1.401(a)(4)-1(c)(3) provides that the nondiscrimination requirements will generally be met on the basis of the plan year. For the definition of compensation used to apply the various tests, you have to look at the test in question. For the ADP test, for example, compensation is defined in Treas. Reg. 1.401(k)-6, to mean compensation as defined in 414(s) and 1.414(s)-1, measured over either the plan year or calendar year, or the portion of the year in which the employee was eligible. For the top heavy minimum, however, the definition of compensation - as per Treas. Reg. 1.416-1 M-7 and T-21 - is the definition in 1.415(c)-2 and you do not get the option to measure it over just the period of the year in which the employee was an eligible participant. For HCE determination, Treas. Reg. 1.414(q)-1T Q&A-13 references IRC 415(c)(3). In general, the term "compensation" doesn't mean the employee's stated rate of pay, but rather the amount actually paid by the employer to the employee. A popular definition of compensation is the amount shown in box 1 of the employee's W-2, plus deferrals. However, compensation is a complex topic and this is only scratching the surface of it.

If you have a short limitation year because of the termination you will need to prorate the 415 limit. This might also effect the the participant if there were "large" employer contributions.

Thanks for your long answer. I recently had a battle with cancer, which I was not expected to survive. In fact, the surgeons have all expressed that they are amazed by not only my survival, but my level of recovery. Regardless, given the severity of the illness and certain permanent "effects", I am thinking I should at least look into the sale of my firm. This is not something I really want to do, but feel it is the responsible thing for both my family, staff and clients. Your detailed overview was very helpful. Thanks again!