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Profit sharing contributions are not subject to ACP testing. They are subject to non-discrimination testing under 1.401(a)-4. Your last sentence is correct, though. If the PS formula meets a safe-harbor formula under the 1.401(a)-4 regs, then you pass.

Someone put on his consulting hat - nice response!

Not saying this is or is not legit, but minor children often have bona fide work in their parent's businesses (and not just sneaker factories in southeast Asia). I have seen one-year-olds on payroll as they appear in marketing materials and TV ads. They could be self-employed, think maybe the E-Trade baby/toddler - sure hope the little dude has a Roth IRA or 401(k)! - so why not an employee? Sure, there are child labor laws, and a red-flag warning that something "funny" is going on would be a plan design with 1000-hour YOS eligibility that somehow the 10-year-old satisfied but other employees did not. But agree you should want and get some assurance, whether from CPA and/or attorney.

Without taking the time to think this through its possible ramifications, the easy and smart thing to do would be to advise your customer that loan fees should come directly from the borrower's account and be done with it. If the employer persists, then let the employer know that this would be against your advice and you will not be responsible for any problems the employer has as a result and amend your indemnification agreement with the employer accordingly. If the employer asks for your rationale, tell him that you cannot provide legal advice and refer him to his ERISA and employment law attorney. I dodge the underlying question, of course, because I don't believe it's worth the time to fool with.

Its really not. Yes it takes a bit of time and as @MoJo points out, you need to gather the documents to state your case. It is absolutely a better experience than a DOL initiated investigation though. For some reason I just don't buy that there is no note or referral if they have notified you of an issue and you choose to not accept the invitation. Is it voluntary? Yes, but you are on their radar, and that is not where I want to be.

Again, since the dental practice sponsors all three plans, the other dentist(s) are co-fiduciaries of all of the plans. One would think they would not want to be exposed to having a PT in one of the plans.

My position would be the current HSA custodian had no obligation to accommodate the request because it related to contributions with a prior custodian. It would have been nice if they could have tried to make something work--but, as you point out, they would still likely have had 5498-SA issues that would be difficult to address. In any case, it's all irrelevant at this point because the 4/15 deadline to allocate the contribution to the prior year has long since passed.

Breaking this down (and agreeing with previous comments and observations), The company sponsor a 401(k) plan for all employees. All of the field employees get a $4/hour non-elective employer profit sharing contribution to the plan. The profit sharing plan is tested for nondiscrimination (since non-field employees do not get $4/hour NEC and the amount of contribution for field employees varies based on hours worked). The nondiscrimination test supposedly passes. The company wishes to offer to the field employees the option to continue receiving the $4/hour NEC or receive $3 in direct compensation. This clearly is considered a cash or deferred arrangement (CODA) going back to the 1950s when Kodak offered employees the right to take their profit sharing amount in cash or have it contributed to the plan. In this case, put another way, a field employee can choose to receive $3/hour in direct compensation, or get a $3/hour amount deferred into the 401(k) plan and get a $1/hour match contribution. There is not enough information to know how this deferral and match interacts with the provisions of the existing 401(k) plan. The 401(k) plan's eligibility to make elective deferrals, any existing match, match allocation eligibility requirements, vesting and other similar BRFs would need to be reviewed. The 401(k) plan also would need to consider what happens should a field employee reach the 402(g) annual deferral limit during the plan year. There would be no opportunity to deposit the $3/hour deferral into the plan without violating 401(a)(30) limits. A guess as to the motivation for considering this idea is that enough field employees want cash-in-hand now, even at the cost of $1/hour off the top and paying payroll and income taxes. The company likely is looking at its portion of payroll taxes plus any impact this may have on other company-provided benefits. As a possible compromise, the company could consider keeping the current $4/hour NEC and making in-service withdrawals as readily available as permissible. For example, these amounts could be withdrawn from the plan once they have been in the plan for at least 2 years. The amounts also could be available if the participant, for example, has at least 60 months of participation, or attained Normal or Early Retirement, or is disabled, or has a safe-harbor or non-safe-harbor hardship. This avoids all of the payroll tax issues, doesn't complicate the 401(k) plan design, apparently already passed nondiscrimination testing, does not involve a match, and cannot trigger 401(a)(30) limits. Once an employee is qualified for in-service withdrawals under any one of these rules, the employee would have access to the funds. Generally, we don't advocate very liberal in-service withdrawal rules and would recommend limiting the number of withdrawals per year, but if the recordkeeper is geared up for plan accounting for new features like emergency savings, qualified disaster, qualified adoption and all of the other available in-service forms of payments, this approach should be relatively to implement.

No, not yet. What do these letters say? Would it be possible to post a fully redacted copy of one such letter?

What does the plan document say? if the plan is a preapproved document there would almost certainly be a section (perhaps in a basic plan document) that governs. But generally yes, it ends up being cashed out to the Estate, and then it goes to whoever takes the estate. It is not eligible for rollover to any inherited IRA in that circumstance.

I have generally found the VFCP experience to be horrible. They nitpick you like crazy. And the clients who have a lot of late deposits are teh same clients where nothing ever ties out. Our fees have to be at least $750 to do the whole thing which is nuts for a deposit that was 4 days late and interest of $150 (or less).