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Your background info is not clear - who is the employer, what is this fund from where these two people get distributions from and how is this income reported to these individuals? To contribute to an employer's plan in any fashion one needs to be an employee of that employer (or employee of sponsoring union or participating employer) and have compensation or earned income from the sponsor. If they are not employees they cannot be in the plan. If they are self-employed contractors they can establish their own plans on their earned income.

The first eligibility computation period for ER is 5/1/2020 to 4/30/2021. Said employee is not eligible for ER money. My assumption is said employee did not work > 1000 hours in 2 months. So for this employee, you start looking at calendar years to see if worked 1000 hours for ER eligibility. 2021 calendar year < 1000 and not even an employee.... but still not eligible for ER. 2022 > 1000 hours I like 1/1/2023 for start of ER eligibility. Hopefully, the plan does not do the one year hold out rule, or rule of parity.... I don't like those plans....

The gateway is satisfied if all NHCEs in the test receive an allocation of no less than the applicable minimum. If this person who worked less than 1000 hours didn't get an accrual in the DB plan, then they have to get the entire allocation from the DC plan. Since they received a DC top heavy minimum, they will have to be included in the test, and if they're included in the test then they have to get the gateway minimum. If this person were otherwise excludable (because they are under age 21, or never worked 1000 hours in any year), then you might not have to give them the gateway minimum, if you can pass testing by disaggregating otherwise excludables.

in for a penny, in for a pound - if they get 3% then that has to be ramped up to cover gateway

I think in most of those arrangements the company is still the employer and sponsor.

Well, if they have no income, their 415(c) limit for after-tax contributions is gonna be pretty small.

Absolutely agree - but keep in mind that a trust can be an employer without operating a business. Charitable trusts, for example, may have a staff to operate the charitable endeavors of the trust. As an employer, the trust itself may be authorized to provide benefits (suitable compensation) to those who handle the administration of the trust. Often that is outsourced, but if the trust is big enough, it doesn't have to be. Often what we call charitable foundation is actually a "trust." For example, the Bill and Melinda Gates Foundation is a functionally a trust, and has employees (many of them actually)....

Expanding on some of the responses above, there's an important distinction between a trust as an owner of a business entity vs. a trust as a business entity. Many kinds of trusts (estate planning vehicles, ESOP trusts, etc.) can own a business entity that is organized as a corporation, LLC, etc. In that case, the owner is a trust, but the operating business/employer is a corporation, LLC, etc. Some states allow the business entity itself to be a type of trust (often called "business trusts" or something similar). In these instances, the operating business itself is organized as a trust (instead of a corporation, LLC, etc.) and is the employer.

An ESOP that owns 100% of the stock of the company is a good example. This arrangement is increasing in popularity for S-corps.

Is the trust an employer? Many "trusts" are in fact, employers, and can (and do) sponsor employee benefit plans....