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You likely have some issues but I don't know if they are big or not. And there's no way to know without diving in and gathering all of the information. The problem isn't that it's too small of a job. The problem is that it's such a big job and they likely won't get paid for all their time.

Yada yada yada. No need to be so thoughtful about this; if the receiving plan won't accept the assets because of their own ignorance, so be it. I'd be happy to explain to the disgruntled participant that they have created their own barrier that need not exist.

If the only nonelective contribution is an even percentage of compensation for all participants, that formula meets the requirements of the 401(a)(4) design-based safe harbor. There is no maximum under 401(a)(4), but of course the 415(c) limit and 404(a)(3) maximum deduction limit need to be considered.

You're not missing anything Austin3515... https://buck.com/secure-2-0-significant-changes-for-employer-sponsored-retirement-plans-start-now/ Buck comment. Currently, 150% of the age 50 catch-up limit is greater than $10,000, so the limit at ages 60-63 would already be $11,250 (even before cost-of-living increases are applied). Additionally, the elimination of pre-tax catch-up contributions for high-income earners will also apply to these catch-up contributions.

The mere fact that the plan has a PS provision will not trigger losing the TH exemption. There has to be an actual allocation of contributions or forfeitures to lose the exemption.

No, the "highest in the last 12 months" only reduces the 50,000 branch of the either-or tree, the 50% branch is unadjusted.

What does the definition of an HCE have to do with a top heavy plan?

I confirm that the HCE definition must be consistent across all the plans sponsored by Employer. Also, the original question lumps together 2 different concepts: non-discrim (HCE definition) and ownership (key employees).

Although the provision that became included in the Consolidated Appropriations Act was written in December (after the IRS’s October 21 release of inflation adjustments for 2023), it seems likely the text was based, as C.B. Zeller suggests, on other bills in the 117th Congress, perhaps with little editing. $6,500 [2022] x 150% = $9,750 < $10,000 If a curious person wants to test the idea that the $10,000 expression, even if inflation-adjusted, might never matter, one might read the full work that supports the Joint Committee on Taxation’s Estimated Revenue Effects of H.R. 2617, JCX-21-22 (Dec. 22, 2022). Those work papers might show the JCT’s assumptions about estimated inflation adjustments as they would affect fiscal years 2025 through 2032. I confess I’m not so curious.

They're being silly. Good stuff here: https://www.irs.gov/retirement-plans/verifying-rollover-contributions-to-plans#:~:text=It's not necessary for the,a rollover contribution is valid.

I suspect that this particular provision was written well before the final bill was passed, and before the huge inflation adjustments that took effect for 2023 were known. In hindsight, we can see that the $10,000 limit is not likely to ever apply. The increased catch-up limit goes into effect for 2025. I suspect the exact dollar amount that applies for 2025 will be revealed in Fall 2024 when the IRS publishes the annual inflation-adjusted limits for 2025.

1.401(k)-(3)(b) reads: "(b) Safe harbor nonelective contribution requirement (1) General rule. The safe harbor nonelective contribution requirement of this paragraph is satisfied if, under the terms of the plan, the employer is required to make a qualified nonelective contribution on behalf of each eligible NHCE equal to at least 3% of the employee's safe harbor compensation." I did not find a reference to any maximum percentage. Apparently, you can give NHCEs as much fully-vested, restricted-withdrawal safe harbor non-elective contributions you want subject to regulatory 415 and annual additions limits. Assuming this is true, it does lead to a question of whether every NHCE must receive the same percentage, or could the SHNEC percent vary among the NHCEs as long as no one gets less than 3%.

And a 2022 conversation. https://benefitslink.com/boards/index.php?/topic/69466-gross-pay-insufficient-to-deduct-401k-deferrals/

If a plan sponsor’s reason for a limit on either kind of elective deferrals is increasing the likelihood (not assuring) that a paycheck will have enough money to support not only tax withholding but also retirement, health, other welfare, and fringe benefits, one might consider this 2008 BenefitsLink discussion. https://benefitslink.com/boards/index.php?/topic/38395-401k-elective-deferral-hierarchy/

See the instructions for the Form 1099R: "Losses. If a corrective distribution of an excess deferral is made in a year after the year of deferral and a net loss has been allocated to the excess deferral, report the corrective distribution amount in boxes 1 and 2a of Form 1099-R for the year of the distribution with the appropriate distribution code in box 7. If the excess deferrals consist of designated Roth contributions, report the corrective distribution amount in box 1, 0 (zero) in box 2a, and the appropriate distribution code in box 7. However, taxpayers must include the total amount of the excess deferral (unadjusted for loss) in income in the year of deferral, and they may report a loss on the tax return for the year the corrective distribution is made."

Yes. You always have to fila a final form.