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It could simply be a matter of cost. Are there a lot more union employees than non-union employees? Also, there could be alot more turnover in the union group so they don't want to vest those amounts if they would otherwise be forfeited. Another thing could be that with unions employers also don't like to give if they don't get... so they might not want to give the SH unless they get something equivalent back from the union.

404(c) means they have to be able to transfer investments at least quarterly, but the deferral rate isn't tied to that.

Yes, the employer and not the union runs the plans but the union can (and should) collectively bargain the retirement plan provisions. Sounds as if you are an HCE and in the union, and that plan fails ADP testing requiring you get a return of some of your deferrals, correct? You can discuss with your union hierarchy responsible for negotiations to consider asking for a safe harbor in the 401(k) plan come the next collective bargaining agreement.

This discussion assumes what is being distributed is cash. The moment you start distributing something other than cash, in an ESOP it can be company stock for example, the rules for determining withholding are different. But any form of in-kind property changes things. But I won't bore with details are most likely not needed.

Seems okay, if the document allows, and again, “if” no one else new works any hours in 2025. You could allocate a full $50,000 if you’re not over the deduction limit. If they would turn age 50-59, or age 64 or more this year, then you could allocate $57,500 between deferrals and ER PS if they deferred at least $7,500 (again watch the ER contribution deduction limit. And if turning age 60-63 this year, and deferring at least $11,250, then you could allocate $61,250. Again, watch the deduction limit overall. If hired before 7/2/2025, then next year the honeymoon is over, and safe harbor would be in order. But really, the owner will likely want to defer in 2025, so just do the 3% safe harbor for 2025. Then talk about doing SH match for 2026 if the 3% is so costly that they just cant stand it.

Rev. Proc. 2021-30, Section 6 (5) Special exceptions to full correction. .... (b) Delivery of small benefits. If the total corrective distribution due a participant or beneficiary is $75 or less, the Plan Sponsor is not required to make the corrective distribution if the reasonable direct costs of processing and delivering the distribution to the participant or beneficiary would exceed the amount of the distribution. This section 6.02(5)(b) does not apply to corrective contributions. Corrective contributions are required to be made with respect to a current or former participant, without regard to the amount of the corrective contributions So, under EPCRS, the corrective contribution should be made to the plan and, because the balance is under $75 (or the applicable fee), a distribution to the former participant does not have to be made and the contribution can be forfeited back to the plan.

Then seems like 2 and 1 to me.

If they both have money in the plan and are both still employed, it’s 2 and 2.

I just added some info regarding this topic on another thread on the board that discusses the pre-approved plan notice requirement (which may or may not still be needed depending on how you read it). Here's a link

Regarding a chapter 7 liquidation bankruptcy, it matters to distinguish the roles: the debtor, which lacks power except as the bankruptcy court or an Article III court authorizes; the bankruptcy trustee, who takes on the debtor’s role as the retirement plan’s sponsor (if the debtor was the plan’s sponsor); the bankruptcy trustee, who takes on the debtor’s role as an employer that participates under the retirement plan; the bankruptcy trustee, who takes on the debtor’s role as the plan’s administrator if the debtor “or any entity designated by the debtor” was the plan’s administrator [Bankruptcy Code (11 U.S.C.) § 704(a)(11) http://uscode.house.gov/view.xhtml?req=(title:11 section:704 edition:prelim) OR (granuleid:USC-prelim-title11-section704)&f=treesort&edition=prelim&num=0&jumpTo=true]; an eligible designee, if the bankruptcy trustee appointed one (see 29 C.F.R. § 2578.1(j)(4) https://www.ecfr.gov/current/title-29/part-2578#p-2578.1(j)(4)); (If ADP is the plan’s recordkeeper, a bankruptcy trustee’s eligible designee might be State Street Bank and Trust Company, or another trust company the debtor had selected as the plan’s trustee or custodian. A recordkeeper might do much of the work under an arrangement with a trust company the recordkeeper suggests to customers. But last I knew ADP is not a bank, trust company, or insurance company eligible to serve as a qualified termination administrator or eligible designee.) As MoJo explains, if a recordkeeper provides a service meant to be nondiscretionary and constrained by the plan administrator’s policies, procedures, and supervision, a recordkeeper might discontinue such a service until it satisfies itself that the recordkeeper gets its instruction from the person that has the plan-administrator powers and responsibility. Likewise, for a service about something delivered to a plan’s administrator (for example, a draft of a Form 5500 report, or a quarter-yearly report about participants’, beneficiaries’, and alternate payees’ plan accounts), a recordkeeper might wait to deliver that something until the recordkeeper has a court’s order or other satisfactory evidence about which person has assumed the plan-administrator role. A directed trustee should not pay anything to anyone until the trustee receives a proper direction from the plan’s directing fiduciary that has power and responsibility to give the direction. This is not advice to anyone.

That is a good question, but it goes deeper than that. Often the trustee claims to be a non-discretionary directed fiduciary (and often claim they aren't a fiduciary - but that is a topic for another thread.) Our practice as R/K and custodian, and the entity directly responsible for directing the institutional trustee, was to not process distributions, as there was no fiduciary to authorize them. Even in those cases where processing distributions was outsourced to us (i.e. the plan sponsor need not be involved except to provide term dates and we'd handle the rest), we would refuse to process distributions as our authority was under an on-going delegation from the fiduciary - that evaporates when there is no active fiduciary to continue the delegation to us (and yes, our agreements so specify). So "freeze" may not be the right term, and the trustee may not have been acting with authority, but rather not acting as not having continuing authority.

I think it’s for terminated participants taking a distribution but not waiving annuity payment.