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And amendment can't be effective for the year if it has a prohibited cutback of benefits. Adding after-tax is an expansion of benefits so should be fine. Though it will be subject to ACP testing, just so you are aware in case you were not. The second part is a bit trickier if you can do it or not. If anyone is entitled to an allocation under the old formula you won't be able to change the formula until next year. However, if no one has yet earned the right to the allocation formula then you could amend this year. generally speaking if your current plans has a last day requirement or an hours requirement that no one has yet met you could do the amendment effective in the current year, provided it's adopted before anyone has accrued a right to the old formula. Safe harbor 401(k) plans have a few additional levels of hoops to satisfy where you might not be able to make the change even with a last day requirement, you'd have to double check on that one if that's you situation.

The IRS has said in conferences that they believe letting having the employer receive funds from the plan and then writing the check for a distribution is unacceptable. That being said, some employers have done it although the rationalization on its acceptability is a bit murky. There was a temporary regulation that implied this was permissible. See Q&A 16 in https://www.ecfr.gov/current/title-26/section-35.3405-1T (which was "reserved" when the regulation became final). Some practitioners felt this Q&A made it acceptable for the employer to be involved with making both the distribution, while others felt that this Q&A made it acceptable only for the employer to submit the tax withholding. Some practitioners took the stance on the question of whether there was a prohibited transaction is it would not be if and only if the employer did not benefit from having had the funds pass through an employer's account. Those who took that stance cautioned employers to hold the cash for the least amount time it took to issue the distribution, and to not put the funds in an account that earned interest. Treasury 31.3495(c)-1 Withholding on eligible rollover distributions; questions and answers Q&A 5 answers: Q-5: May the plan administrator shift the withholding responsibility to the payor and, if so, how? A-5: Yes. The plan administrator may shift the withholding responsibility to the payor by following the procedures set forth in § 35.3405-1, Q&A E-2 through E-5 of this chapter (relating to elective withholding on pensions, annuities and certain other deferred income) with appropriate adjustments, including the plan administrator's identification of amounts that constitute required minimum distributions. Prudence says do not involve the employer in writing distribution checks. Should circumstances result in the employer receiving and depositing a check in an employer's account, then the employer should as quickly as possible write the check to the participant or to the trustee/custodian who routinely issues distribution checks, and the employer should document all of the circumstances, the actions taken to have the distribution issued, and if needed, any steps taken to give up any interest earned on the amount while in the funds were in the employer's account.

AI has a tough time saying anything meaningful about pension topics, as evidenced by the prior post.

If Company B is unincorporated, then Bob is a 10% partner or joint venturer of an owner of Company A. That makes Bob a disqualified person under Code section 4975(e)(2)(I), and the transaction is a PT, I believe. (And, I think, as EBECatty said, even if it wasn't a PT on its face, Joe would have a hard time arguing to the IRS that this was not a self-dealing transaction, as his likely motivation to make the loan is his relationship with Bob.)

Agreeing with Paul and echoing a comment I made on another post earlier, just because maybe you can doesn't mean you should. And EBEC brings up a great point and potential gotcha as sometimes a PT can result through indirect avenues.

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).

Generally, a loan from a DB plan treated as an investment of trust assets and is subject to all of the due diligence needed to assure that the loan is an appropriate investment to be held by a qualified plan. Company A fiduciaries would bear the responsibility of making an assessment that this is an arms-length transaction unaffected by Bob's status as a co-owner of business B, that the loan itself is a sound investment. It doesn't sound like Bob is a participant in the DB, so one would expect that a loan to Bob would be backed by sufficient collateral to cover the loan in the event of default. Unlike a participant loan from a defined contribution plan, there is no vested account balance available to support the loan. If Bob has the collateral to back up loan, it begs the question why the Bob cannot get a loan from sources unrelated to the plan. A loan from an unrelated source would keep the DB plan cleanly out of equation. To add a twist to a proverbial saying, neither lender borrower be; for loan oft loses both itself and co-owner.