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Rev. Rul. 84-69 (emphasis added):

Presumably, this wouldn't be being asked unless the plan is using a graded vesting schedule. My reading of the provision is that the participant is not 100% vested. In the example, this person's Normal Retirement Age is the 5th anniversary of participation because it is the later of the two... i.e., it is later than her attaining age 65. If she has not attained the 5th anniversary prior to her termination of employment, she would not be 100% vested (though she may be partially vested under the normal vesting schedule). I don't see the issue if you are quoting the adoption agreement for the plan at issue and the basic plan document that is to be used in connection with that adoption agreement. You follow plan terms. If you are quoting just some basic plan document that is not being used in connection with the adoption agreement for the plan at issue, I still believe that is the way that everyone I know would interpret the language. If you must have specific IRS authority for this conclusion, I don't think you will find it. (I will check back in hopes that you do.)

Had a similar issue a few years back, but much bigger in scope. A well known ERISA attorney told us to just file the forms now. Paraphrasing, but the answer was "since there is no way to cure a late filing, just file and explain the reason if (big if) they ask any questions". Like you assumed, they are very accommodating since there is no correction program. In my opinion, these penalties were never meant to be collected in the first place ($150k for a late 5500?), they are just there to make the DC math work for new legislation.

The IRS compliance questions apply to the 2024 Form 5500. While you are filing for a 2021 Plan Year, you are filing a 2024 Form 5500. You need to complete the questions.

And that is why there is always a session on Compensation at every conference. Even though is has remained basically unchanged in the regulations, it is still one of the most confusing aspects in the plan document and for administrators.