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Not only CAN the employee # 2 participate, employee # 2 MUST be allowed to participate, assuming #2 has satisfied the eligibility requirements under the SIMPLE document. Take a look at the instructions on the SIMPLE document, "Which Employers May Establish and Maintain a SIMPLE IRA Plan."

The 1096 is used by the government to verify the taxes withheld for the YEAR as well as the amounts paid. If you use a 2021 1096, the IRS will look for the amounts in 2021. How many letters are you willing to write to explain the discrepancy??

Without the SB you run the risk of having the filing disallowed and incurring late filing penalties. Once amended to include, you're all set!

I had a discussion with a representative of a trade association on this topic today who pointed to the 2022 Greenbook which gives us some insight into how Treasury was thinking about this a year ago. You can access that at the following link (page 106): https://home.treasury.gov/system/files/131/General-Explanations-FY2023.pdf Their proposals included, in part: Section 7701 be amended to define on-demand pay arrangements Section 3401(b) be amended to provide that ODP arrangements be treated as weekly payrolls Sections 3102, 3111, and 3301 be amended to clarify that ODP arrangements are not loans It's not specific to plan issues, but it's better than nothing. It may also be a prudent practice for the client to document the position they take with regard to the treatment of on-demand pay, and rationale for same, to show that fiduciaries recognized the challenges this creates for their plan and made a reasonable decision that they can consistently apply, absent future regulatory guidance.

The story suggests someone used your work without the business courtesy of engaging your services or explaining why they weren’t. If you’re willing to speak with the certified public accountant, what else could you say beyond suggesting the CPA maintain her malpractice insurance, might want her own advice about whether to disassociate from further tax returns and other professional-conduct points, and might consider suggesting that the employer lawyer-up. Or if you are willing to offer services to support corrections, suggest that the employer’s lawyer engage you, to maximize evidence-law privileges for confidential communications. And you’d require a much-more-than-you-estimate advance retainer. Among other cautions, don’t you want to test whether the employer is serious about corrections?

Without doing any research, I believe that it would be separate lookback years for the different plans. Does the PS/DB by chance use the calendar year election? That would at least make it easier to keep track of who is an HCE and who isn't, although it might potentially have other ramifications - ask the cash balance actuary!

See regulation 1.416-1, question T-23. Each plan independently determines the present value of each accrued benefit as of the plan's determination date. The present values as of the determination dates that fall into the same calendar year are aggregated. You would then have one combined test for each calendar year.