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A failure to deposit deferrals timely is not a qualification failure that can be corrected under VCP. There's nothing in 401(a) that says that you need to make timely deposits. It's not a qualification error unless it rises to the level of being a misuse of plan assets or embezzlement. The fact that the amount of money involved is $2,500 would indicate it is not that. You cannot get excise taxes waived under VCP. And, the IRS cannot generally waive excise taxes anyway. So, what I would do is file the late Forms 5300 with the excise tax amounts, which should not be very large if the principal amount is $2,500, since the excise tax is based on the interest, not the principal, of the late payment. File the Forms with a letter explaining why the forms are late and requesting waiver of late filing penalties. If you are assessed penalties, they are (a) interest on the unpaid tax balance at IRS rates, (b) a late filing penalty of 5% of the unpaid tax for each month up to a maximum of 25% of the unpaid tax. This can be waived if the IRS gives you the waiver for reasonable cause, and (c) a penalty for late payment of the tax, which is 1/2 of 1% of the unpaid tax per month, up to a maximum of 25% of the unpaid tax. This is also waivable for reasonable cause. There is also some chance that the IRS would assess the second level excise tax of 100% of the amount involved (i.e., the interest on the late payments). So, you can see form this that the penalties for late filing of the Form 5330 are not gigantic. Just do it, hope for the waiver, but know that it's not going to be ridiculous even if the waiver isn't granted. This is, of course, just my thoughts as an accommodation for those on BenefitsLink and should not be construed as legal advice.

I’m not so sure. Even if it’s w-2 wages, an owner only plan isn’t subject to Title 1 of ERISA and that’s what drives the DOL.

I, too, agree that you need to hire an attorney to work with you. Here are some things you can do now to facilitate the process. Gather every scrap of written documentation you have that is related to any agreement between your wife and the medical practice. Preferably, the parties to each document and the date of each document are available. Documentation includes letters, agreements, contracts, email, text messages... If there were oral promises, at least describe to the best of your knowledge who made the promises, when they were made, and who else may have known about them. Gather copies of your tax returns showing any income received from the business. This includes all supporting documentation and schedules going back as far as available. Included copies of any information that may have been provided to your wife about the finances and financial condition of the practice. Prepare a timeline of events from her starting to work with the medical practice up to now. In particular, was the offer of ownership made around the time the COVID loan was in default? With respect to the promised retirement plan, provide any information that show she was accruing a benefit. In particular, have documentation if the offer of partial ownership was in place of the previously retirement benefits. Be prepared to respond to the question of why she did not ask about her retirement benefits earlier. Gather similar documentation about the promised dividends. Note that corporations pay dividends to shareholders. Your wife should have documentation of the number of shares that she owns, and of how she acquired (or was given) those shares. With this information in hand, schedule an interview with a reputable attorney from a reputable law firm to discuss your wife's case. If you are not comfortable with how the discussion goes, approach another attorney or law firm. You may wish to ask whether the attorney sees this as a likely case of employment law, or a case of fraud on the part of the other owners, or both. You commented that "if she leaves her job, we lose everything." The attorney can provide some guidance to what extent, if at all, this may be true. Depending on the terms of the agreements, walking away may be the better option. You also need to be prepared in case the medical practice can force your wife out of the business. Full disclosure - I am not an attorney and this is not legal advice. I am sharing with you the kinds of steps I have seen others take when confronted with seemingly impossible situations. You have a difficult and stressful road ahead. You will need help to navigate the way forward. Stay focused on the facts, get help, and may you find peace.

I agree with @ratherbereading and @Bill Presson. This is way beyond what can be addressed on a message board, OP needs to engage an attorney ASAP.

Agree with the above. You also should have had an attorney and CPA involved either the initial agreement and the acquisition agreement. Seems like those were big misses.

Someone else can chime in but this is beyond the scope of this board (at least mine) - sounds like you need a good attorney to address this. Bankruptcy isn't the end of the world; you can recover from that. Best of luck.

One of today's items in the Benefits Link newsletter had a write-up on hardship distribution self-certification. The following is an excerpt. I don't read Section 312 of SECURE 2.0 as containing any such restriction. What am I missing, if anything? Employers may now rely on an employee self-certification that they have experienced a hardship and that the employee has no other funds available to satisfy the hardship. Self-certification is only available for the first hardship request during a plan year. If the participant requests more than two hardship distributions in one year then the employer is required to have physical proof of the hardship.

I'm with you. I think the author is mistaken.