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Even if the plan year began December 30, 2022 and ended December 31, 2022, might the limitation year have been January 1, 2022 to December 31, 2022? “Unless the terms of a plan provide otherwise, the limitation year, with respect to any qualified plan maintained by the employer, is the calendar year.” 26 C.F.R. § 1.415(j)-1(a) https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/subject-group-ECFR686e4ad80b3ad70/section-1.415(j)-1#p-1.415(j)-1(a). Even if both the plan year and the limitation year were December 30-31, 2022, might a sole proprietor’s § 401(c)(2) earned income for 2022 have been earned on December 31, 2022? “[A] sole proprietor’s compensation is deemed currently available on the last day of the individual’s taxable year[.]” 26 C.F.R. § 1.401(k)-1(a)(6)(iii) https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/subject-group-ECFR6f8c3724b50e44d/section-1.401(k)-1#p-1.401(k)-1(a)(6)(iii).

Well, first, did a plan exist? Communication to participants is an essential part of establishment of a plan. If not, then there may be tax fraud, depending on how contributions were dealt with. If a plan did exist, misuse of employee benefit plan assets is a FEDERAL felony (and Ill look for the cite). In either event, I would 1) advise them of the error of their ways; 2) resign immediately, and 3) consult an attorney about your obligations concerning having witnesses/having information/evidence of the commission of a crime. Part of me also would also anonymously alert the DOL (their website lets you do that) about this situation (and I resist that urge almost daily....)