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If you have no allocation conditions, then you don't get to exclude the terms under 501 hours. You can only exclude them if the hours/last day rules are the SOLE reason the participant isn't benefiting. (That's different from the sponsor just choosing for them to be a zero even if the plan would allow something nonzero.)

As Effen says, you need to work through your attorney on this. If the QDRO refers to a plan, and the money is in an IRA, then that needs to be changed at the very least. But there is an implication that the QDRO terms were agreed upon by both parties so this has to go back to your attorney.

You don't need to accept it, but I strongly recommend that you work through your attorney.

How does an eligible participant "opt out from year to year" on a CB plan? Either you satisfy the accrual requirement and get a benefit or your don't, it's not a CODA. But assuming that there was some amendment timely and properly executed such that no HCE benefits under the plan, or no HCE worked enough hours to accrue a benefit, then as CB Zeller pointed out you will automatically pass gateway and 404(a) because the HCE rate is going to be $0 and 0%. Assuming the Plan's are not top heavy then if no HCE benefits for PS or CB than your PS could be $0. If the combo plan is top-heavy, RTD on how you satisfy that in your specific situation.

If no HCEs benefit in the plan, then the plan automatically satisfies 401(a)(4), including the gateway.

The participant should have been taxed each year on the PS-58 cost. That becomes basis in the contract and upon surrender the cash value in excess of the cumulative PS-58 costs is taxable.

How are they still receiving the cash if that option was eliminated? What are the normal allocation conditions in the PS plan and are the folks getting cash now NOT getting PS? Feels pretty facts and circumstances as to whether or not this is still hiding as a deemed CODA.

Start with your HR department and ask if they will get the money back for you. Did you keep a copy of the opt out form? If so, send them a copy. If you met the deadlines to opt out timely they might be able to help.

... and don't assume that 50% division is required. Other proportions are possible, which might be loosely described as "divorce horse-trading".

Yeah, sorry, I should have specified that. I'm looking at this in general terms.

The topic of whether a self-employed individual is or is not an employee if the individual has no (or negative) income for a plan has come up when discussing plan administration. This has been an issue in particular for purposes of coverage and compliance testing. There is no conclusive guidance, with closest direction is to be consistent in treating the individual for all plan purposes and this would tie into the individual being otherwise treated as an employee. I expect this is also the case for determining service. With respect to elapsed time rules, the a period of severance of less than 12 months will be included in elapsed time service. One could build an argument that having documentation that the SE individual was compensated for one hour of service would be enough to continue the accrual of elapsed time service. This would not be invalidated if the net earnings from self-employment at year end was zero. I note that being available for service differs from actually performing an hour of service (unless there is some form of on-call compensation). While SE compensation is deemed earned as of the end of the plan year, there is no deemed service rule other than the service spanning rules (including certain leaves of absence, military service...) Good question, with pathways to differing conclusions.