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I would also caution against repeating this strategy any time within the next few years for the same employer, and make sure the employer is aware of that, as you do not want a pattern of amendments that creates a discretionary arrangement in practice.

It is likely @Bri 's boss was making the comment long before the EBSA started to be used. The name of the group at the time ERISA was enacted was the "Pension and Welfare Benefits Program". In January 1986, the group became the Pension and Welfare Benefits Administration and used the acronym PWBA. It was February 2003 when the group became the Employee Benefits Security Administration (EBSA). Did someone just whisper "OK Boomer"?

For sole proprietorships and partnerships, the owners are allowed to make deferrals against any draw they take from the business. All of the income from self-employment and deferrals are considered to be determined as of year. S-corp shareholders typically get W-2 income and S-corp dividends. The S-corp dividends are not considered compensation for purposes of the plan. Conceivably, the IRS could say that if payments made during the year that were not from amounts subject to taxation when paid, then salary deferrals cannot be taken from those payments. I haven't seen this situation, so this is just my thoughts.

And understand that a freeze doesn’t mean there won’t be any contribution due. It will still depend on the investments and overall funding level.

Very common strategy. Just make sure you do it before anyone earns a benefit and make sure you get the 204(h) notices out on time.

As Bill points out the excess must be surrendered to maintain the "incidental benefit" and the terms of the Plan. Any excess cash value that would also be surrendered along with the reduction in death benefit would be earnings to the Plan.

Surrender the excess insurance.