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She is subject to the same eligibility conditions as all other employees. Now if you are asking if her unpaid service counts towards the 1000 requirement, that's not an argument I'd like to have with the IRS on audit.

If it's not an annual addition because of their 415 limit being zero, I'd argue those aren't actual deferrals triggering the THM. (As opposed to an ADP refund)

Its plan design. The plan is safe harbor regardless of any actual deferrals and match contributions.

We would never send out a $0.00 1099-R. Our position is the taxable amount is after the fee. So there wasn't a taxable distribution in this case. I see what is in effect the fees resulting in the person having no balance after the distribution and got no payment on a regular basis where I work. Peter, normally I find your insights valuable. In this case I am going to go on record saying you're over thinking this one. Back to the original question. In the case of the smallest balance you listed every place I know that sets up an IRA would change you more to do so than the balance listed. The choices become keep the money in the plan or pay the person and watch fees eat the whole payment.

I second what Bri said.

There can be reasons for a participant in an employment-based retirement plan to prefer it over an Individual Retirement Account. Among them, opportunities for guarding a retirement asset from some kinds of creditors’ claims might be better with an employment-based plan (even if not ERISA-governed) than an IRA. This might be so not only under bankruptcy law, but also under other laws. As CuseFan suggests, there is no shortcut; one must get into the details of those laws and how they might apply to facts and circumstances the individual plans against. The individual might want not only legal advice but also practical advice across her whole team of advisers, including lawyers (for each topic), certified public accountant, physician, actuary, financial planner, investment adviser, and TPApril. This is not advice to anyone.