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The scheme is intended to allow the individual to maintain the 401(k) plan and take advantage of the higher levels of contributions. The simplest approach is to make the IRA rollovers out of the existing plan. Next, adopt a prototype plan owner-only plan and set up a bank account in the name of the trustee of the plan. She can deposit her contributions into the account and then make the rollovers into the respective IRAs. She can keep a very small amount in the bank account and will not have to file a Form 5500-EZ. Further, with the bank account there likely will be no income to have to worry about any separate accounting between the deferrals and the NEC. She will need to prepare two 1099Rs each year for the rollovers to the IRAs. As rollovers, there will be no tax withholding to deal with. None of this is technically challenging. If she feels it is still a hassle, there are local TPAs or CPAs that can do this for a small fee.

Maybe you could put a little more flesh on that skeleton?

I think we're all getting to the same point... while you COULD do this, if you do it carefully, there's no real benefit to doing it. At least, none worth the headaches if something gets messed up along the way. One person I mentioned it to suggested that maybe the two brothers had separate companies when the plans were created and then merged their businesses, and no one thought about how that might affect the plans. Of course, he's an optimist and likes to assume the best in people. LOL

I'd also add that you may want to look closely at the fiduciary self-dealing PTs (in addition to the extension of credit). If the DB plan is making a loan to Bob so that Bob can invest the borrowed proceeds into something Joe otherwise couldn't afford, I think you have a problem. For example, Joe wants to buy a piece of real estate for $500,000. He has $400,000. Bob agrees to borrow the last $100,000 from the DB plan to co-invest with Joe, allowing Joe to buy the property. Even if the loan is not directly prohibited under 4975(c)(1)(B), because Bob is not a disqualified person, it could still be fiduciary self-dealing on Joe's part under 4975(c)(1)(E).

Sure, although I had assumed the goal of distributing it in-kind was so the account owner could use the property. The facts involved a one-participant 401(k) plan, so I don't think rolling it over from a solo 401(k) to an IRA would solve the issue of the owner be able to use the property (or the RMD issue).

I think you would need to have division D in a separate plan and make sure both plans would pass 410(b) on their own. Others here will be able to verify.

Are there any HCEs in D? I'm not sure about QACA SHM, but in regular SHM you can't have an additional match where any HCE can, by design, get a higher rate of match than any NHCE. I also don't think you can restructure D out like that, but I'm not sure. If D was all NHCEs I think you'd be OK regardless.

I think your first statement was the answer to your question, LOL, as these situations often get treated like they are personal bank accounts rather than QPs, IMHO.

Peter, this compliment is long overdue. You are without question one of the most objective and fair minded observers I've encountered, as well as being a great source of information. If you decide to run for higher office, I'll vote for you!