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but zero current HCEs would be covered, so no big deal if a handful of now-they're-NHCEs don't benefit.....

Box D - didn't paste in well, but see below Form 5500-SF Department of the Treasury Internal Revenue Service Department of Labor Employee Benefits Security Administration Pension Benefit Guaranty Corporation Short Form Annual Return/Report of Small Employee Benefit Plan This form is required to be filed under sections 104 and 4065 of the Employee Retirement Income Security Act of 1974 (ERISA), and sections 6057(b) and 6058(a) of the Internal Revenue Code (the Code).  Complete all entries in accordance with the instructions to the Form 5500-SF. OMB Nos. 1210-0110 1210-0089 2021 This Form is Open to Public Inspection Part I Annual Report Identification Information 0BFor calendar plan year 2021 or fiscal plan year beginning and ending A This return/report is for: X a single-employer plan X a multiple-employer plan (not multiemployer) (Filers checking this box must attach a list of participating employer information in accordance with the form instructions.) B This return/report is X the first return/report X the final return/report X an amended return/report X a short plan year return/report (less than 12 months) C Check box if filing under: X Form 5558 X automatic extension X DFVC program X special extension (enter description) D If this is a retroactively adopted plan permitted by SECURE Act section 201, check here. . . . . . . . . . . . . . . X

I received a DL not long ago on an individually designed 401(k) plan with the same provision. The 401(k) excludes every employee who is, or who has ever been, an HCE. The nonqualified plan covers everyone who is, or who has ever been, an HCE. Basically, once you become an HCE in one year, you are forever excluded from the 401(k) plan and covered by the nonqualified plan. While that could cause an issue with the requirement to cover only a top-hat group for some employers, here the demographics were such that it wouldn't be a problem.

"satisfying coverage" would still be an issue because "former HCE" isn't an HCE.

"HCEs and Former HCEs" seems a reasonable classification to define excluded employees.

PS, if you are a nonfiduciary service provider taking instructions from the plan’s administrator or trustee (which might be a qualified termination administrator, court-appointed fiduciary, or other successor fiduciary), you ask the fiduciary for its instructions. If you are the fiduciary, you face decisions about the plan’s accounting and final distributions.

However the employer’s paymaster and the plan’s administrator resolve challenges of these kinds, it might be stronger to put the solutions in written procedures, and in participant-facing communications, including a summary plan description and the form by which a participant instructs her elective deferral.

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One of the aspects of the cautions against inexperienced assistance in these matters also applies to the "other distributable event" ideas: the different transactions have different implications, specifically including federal and state tax consequences. The tax consequences of dividing and account by QDRO vs some other avenue for extracting money from the plan for ultimate division of the account are quite different and would change the economics of the "equal" division between the parties. It is more complicated than dividing by two and filling in some forms.

I admit I am a DC guy not a DB guy so I normally read this out of curiosity and not say anything. However, I will at least suggest you think about how rehires will be addressed and get that in the amendment. What if a person was hired and left before the date 1/1/23 and only had 2 YOS so wasn't vested in the plan and gets rehired after 1/1/23? I would make it clear how they will be treated in everyone's mind. I work with a number of firms with very high turnover and to keep it simple everyone agreed it was original hire date and that was written in the amendment. Maybe it is obvious in this type of plan how this will work but I am throwing it out there as I have seen this turn into a debate after the fact in DC plans. You can nip this up front if you think it through.

What's wrong with letting them participate in the year(s) they are NHCE's? The plan won't fail the ADP test if they contribute when they are NHCE's.

Agreed, any reasonable determination that is defined and not subject to annual employer discretion in its application, would be permissible provided the result then satisfies coverage, which would be an automatic if all HCEs were always excluded.

In my opinion, you need to have more to go on than "the market was down." Have the client or investment institution provide you with the rate of interest those participants would have received had the matching contributions been invested in their accounts (assuming participants give investment direction, those rates would likely be different for each participant). It's possible (although maybe not likely) that one participant was invested in a very conservative investment vehicle and had a small positive return. If all of those accounts had investment losses, the safest thing to do may be to not allocate interest on the late matching contributions (rather than reducing the matching contributions for the loss, although there may be validity to that argument). There's no requirement to allocate interest if there is none. We have done a few corrections where we did not include interest because of negative returns during the period of failure. We always document an EPCRS correction with a memo to the file that describes the failure; gives a detailed description of what we did to correct the failure, including the process, calculations, and other considerations, if any; and recites which sections of EPCRS we relied on in making the correction. And we attach any pertinent calculations or documentation (such as something showing what the interest rates were for each person). This is very helpful for the client to have in case of audit so they can show that they appropriately fixed an operational failure. It's also helpful in cases where there are personnel changes in a company and the new people are trying to figure out what their predecessors did.

Lisa.Q, thanks for your post. I had contacted FT a while ago regarding restructuring (pre June 2021) and prior to the enhancement using excluded classes was the recommendation. I missed that June 2021 update.

Blinky, I'm far from an expert on this subject, but I'm aware of many self-employed farmers using Schedule F income as compensation for qualified plans. Does that individual at your firm still have the research? Any specific justification for the opinion? Any one else have a comment on this subject. CPA's Tax Attorney's in the House??? :