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Attribution of ownership for purposes of the substantial owners exemption applies only in the case of a corporation.

And the Nerds Cheer? Secant, tangent, cosine, sine. Three point one four one five nine!

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.

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.

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.)

What would the client like to do? If they want a QRP I don't think you need an amendment, you just need to send the excess assets (or some percentage of them) that would would have reverted to Employer to a QRP to reduce or eliminate the excise tax on reversion. Your other options all seem reasonable if they want to amend the excess from reversion to allocate to participants or amend the Plan to increase benefits such that there isn't an excess.

You can correct W-2s for the current year and up to three prior years by filing Form W-2c with a Form W-3c. The Social Security Administration will be informed of the changes and likely will correct the earnings history associated with the deceased. This may or may not affect the spouse's benefit depending on whether the spouse is or will be have benefits based on the deceased's earnings history. Hopefully, you do not have retirement plans that include considering in the plan definition of compensation distributions from NQDCs, or considering Social Security benefits in a defined benefit plan formula. I would expect the service providers for those plans would be aware of the death of a participant and would have questioned having W-2 income reported on plan census data. I do wonder if or how the spouse may have been reporting W-2 income reported for the deceased on the spouse's personal tax return. That can be a whole other mess, but it is not really your mess to sort out.

See here for examples. https://www.irs.gov/retirement-plans/mid-year-changes-to-safe-harbor-401k-plans-and-notices I believe with Secure Act you can add a 3% non-elective SH up to 30 days before the PYE or a 4% non-elective SH up until the end of the Plan Year but you can't add a matching SH mid-year, that needs to be done before the PYE with the associated SH notices and timing that goes with it. And you aren't allowed to switch between SH types (matching or non elective) mid year.

While I’m good on fiduciary law, I’m no more than a novice on qualified-plan rules. But using your expertise, consider these points: Elapsed time doesn’t measure service; it measures time that elapses between a beginning moment and an ending moment. The ending moment is “[t]he date the employee severs from service[.]” 26 C.F.R. § 1.410(a)-7(a)(2)(ii) https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/subject-group-ECFR686e4ad80b3ad70/section-1.410(a)-7#p-1.410(a)-7(a)(2)(ii) A perhaps related point of tax law treats someone who has been a self-employed individual as continuing to be a self-employed individual even if a year’s earned income is zero or negative. The term “self-employed individual” means, with respect to any taxable year, an individual who has earned income . . . for such taxable year. To the extent provided in regulations prescribed by the Secretary, such term also includes, for any taxable year— (i) an individual who would be a self-employed individual within the meaning of the preceding sentence but for the fact that the trade or business carried on by such individual did not have net profits for the taxable year, and (ii) an individual who has been a self-employed individual within the meaning of the preceding sentence for any prior taxable year. I.R.C. (26 U.S.C.) § 401(c)(1)(B) http://uscode.house.gov/view.xhtml?req=(title:26%20section:401%20edition:prelim)%20OR%20(granuleid:USC-prelim-title26-section401)&f=treesort&edition=prelim&num=0&jumpTo=true. A regulation the statute calls for, and delegates to, provides: For purposes of section 401, a self-employed individual who receives earned income from an employer during a taxable year of such employer beginning after December 31, 1962, shall be considered an employee of such employer for such taxable year. Moreover, such an individual will be considered an employee for a taxable year if he would otherwise be treated as an employee but for the fact that the employer did not have net profits for that taxable year. . . . . 26 C.F.R. § 1.401-10(b)(1) https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/subject-group-ECFR6f8c3724b50e44d/section-1.401-10#p-1.401-10(b)(1). If the self-employed business has not ended and the self-employed individual remains available to perform services if her deemed employer gets an engagement, the individual might not have severed from service. If that’s the administrator’s interpretation of the plan’s governing documents, the self-employed individual and her deemed employer might be careful to file tax returns so they’re consistent with not having closed the business. For example, a sole proprietor’s Schedule C might show a zero revenue, a little expense (for a business-privilege tax, or something else needed to keep the business available), and a slight loss.