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I would like to hear more about this. 1) How did the PBGC determine the existence of the plan? 2) How did the PBGC determine coverage?] I'm sure I have other questions, but it is fascinating to me that they would even bother.

Key employee deferrals are indeed considered in the key employee allocation rate for determining the top heavy minimum.

Another resource might be MyStockOptions.com

I have a few points to add: (1) SECURE 2.0 section 305 opens with "Except as otherwise provided in the Internal Revenue Code of 1986, regulations, or other guidance of general applicability prescribed by the Secretary of the Treasury or the Secretary’s delegate". This seems to give the IRS/Treasury pretty broad discretion to issue guidance saying that self-correction is not permissible in certain specific contexts. As a technical matter, it could be read literally to mean that self-correction has not yet been extended at all, because the existing EPCRS program is "guidance of general applicability prescribed by the Secretary of the Treasury or the Secretary’s delegate". However, it seems pretty apparent from the context of SECURE 2.0 that Congress intended to expand self-correction, so most people seem to be operating under the assumption that self-correction is broadly expanded unless and until the IRS clarifies that it is not. That said, it seems pretty clear that the IRS could issue guidance tomorrow and say that no document failures can be self-corrected. So, "what the IRS allows" is quite relevant. (2) Even before SECURE 2.0 was passed, EPCRS permitted some document failures to be self-corrected. If correction of the scrivener's error would favor participants, correction is fairly broadly available. Have you reviewed the Rev. Proc. to see whether you can self-correct under pre-SECURE 2.0 rules? (3) I think SECURE 2.0 reads most naturally to say that you can self-correct any eligible inadvertent failure, so long as you act promptly after you discover it to implement the substantive correction prescribed by EPCRS. There are a handful of limited exceptions: (i) if the IRS discovers the failure on audit before you take steps that demonstrate a specific commitment to self-correction, (ii) if the self-correction is not completed within a reasonable period of time after the failure is discovered, (iii) if an exception prescribed in the IRS guidance that hasn't yet come out applies, (iv) if the failure is not an "eligible inadvertent failure" (plan fails to maintain appropriate practices and procedures, or failure is egregious, intentional, abusive, etc.), then self-correction is not permitted. But I don't see any exception in SECURE 2.0 saying that you can't self-correct plan document failures or nondiscrimination failures. (4) The main reason to utilize VCP at this point is to obtain certainty regarding the correction approach you are selecting. If the correction is clear under EPCRS, and none of the limited exceptions to self-correction applies, then there is no reason to file a VCP submission. However, if the client wants to move forward with a correction approach that is not clearly correct under EPCRS, then an IRS submission can offer an opportunity to obtain certainty that your correction approach is not going to be challenged by the IRS down the road. Of course, participants could still sue, and their claims would not be bound by an IRS compliance statement anyways.

Nate S has provided great guidance with regard to who truly is an "officer." But in an ESOP company, the shares in a participant's ESOP account are NOT direct ownership. In a 100% ESOP owned company, there could not be any "owners" other than the ESOP. So you can essentially disregard the ownership test in determining Key Employees... you would simply base it on the officer and compensation thresholds. Hope that helps.

Two cannibals are eating a clown. One says to the other: "Does this taste funny to you?"

I'm not sure I see something that is correctable because it doesn't look like the plan will have a "failure" if you allocate the $60 K contribution plus the $60K reallocation from the QRP, it is just that the NHCE is likely to get a windfall. Just to throw out some numbers with the following assumptions with prorata allocation capped at 415. Owner pay $305,000 - allocation $61,000 (20%) Wife HCE pay $50,000 - allocation $29,500 (59%) NHCE pay $50,000 - allocation $29,500 (59%) You don't violate 415, you don't have a deduction issue, you don't have a discrimination issue. I realize it's not ideal giving the NHCE a 59% of pay allocation but my guess is on an audit that might not be far from what the IRS would be looking for. I don't know maybe the if the wife and owner are older than the NHCE and the plan has everyone in their own rate group you can skew more of the allocation to the wife but that would depend on demographics and plan terms.

If these benefits aren't incorporated into a self-insured major medical plan, this would really need to be an HRA to work properly. I typically refer to those as "specialty HRAs." Here's an overview on that issue: https://www.newfront.com/blog/addressing-employee-health-plan-exception-requests-part-vi Of course the employer could choose not charge any amount (i.e., fully subsidize) the COBRA premium for the HRA. The COBRA rules permit you to charge up to 102% of the cost of coverage--but any amount below that is always fine. Assuming they want to charge for the coverage, the IRS doesn't have great guidance on how to address the COBRA rate for HRAs, but here are my thoughts: https://www.newfront.com/blog/cobra-for-infertility-hras-and-other-specialty-hras Determining the Specialty HRA COBRA Premium The most difficult aspect of applying the standard COBRA rules to an HRA is determining the applicable premium. The COBRA rules do not naturally lend themselves to an account-based plan such as an HRA. The limited IRS guidance available in this area states that the standard COBRA rules apply for determining the specialty HRA premium. Those rules permit the employer to charge up to 102% of a reasonable estimate of the cost for providing the HRA to a participant. (Keep in mind that although the specialty HRA is exclusively paid by the employer for an active participant, COBRA will shift that cost of coverage to the qualified beneficiary.) We find that most employers are comfortable setting that reasonable estimate at 60% to 80% of the amount made available annually under the specialty HRA. This is based on the general rule of thumb that HRA participants tend to take reimbursement of roughly 60% – 80% full HRA balance made available each year. For example, assume the specialty HRA has a $10,000 annual limit. The employer might set the COBRA premium at 75% of that amount, plus the 2% administrative fee. That would result in a monthly COBRA premium of $637.50 ($10,000/12 *.75 = $625 x 1.02) for any qualified beneficiary enrolled in the specialty HRA through COBRA. Key Point: The COBRA rate is not tied to the employee’s balance remaining in the HRA at the time of the qualifying event, but rather to the amount made available under the HRA. That contribution amount would have continued to be credited to the HRA during the COBRA period. So even if the employee had taken reimbursement of $2,500 of the HRA’s $10,000 annual limit at the time of the qualifying event, the COBRA rate would still be based on the $10,000 amount made annually available—at a monthly premium of $637.50 based on the example above. This means that all COBRA qualified beneficiaries will have the same COBRA premium regardless of their remaining specialty HRA balance. Here's a slide summary: 2023 Newfront Fringe Benefits for Employers Guide

If everyone was in their own rate group, maybe you could construct a PS contribution for 2022 based on those still employed when you declare it in 2023 and still pass testing. Seems a very aggressive position to me though. But if it is simply 1000 hours, employed on the last day of the year, I don't see how you get around that.

Can you get the payroll company to amend the W-2 to reflect that as a 401(k) Contribution? I don't know that that is 100% correct but it would "fix the issue"

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

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.