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You can parse otherwise excludable employees but must test that group separately and you don't get a free pass because that group has HCEs. You may want to try restructuring and parse the young HCEs with older NHCEs and test that group on contributions. The question then is whether your restructured plans can pass using ratio percentage or if you can pass average benefits with those young HCEs (might need to calculate AB% on contributions as well).

And the plan must have the safe harbor provisions. It is not considered safe harbor if the plan does not say it is safe harbor.

Isn't one advantage signing after 12/31 not filing 5500 form? Actuarial certifications still need to be done For example (extreme one): S-corp (with employees) decides to start one on 9/14, signs and funds on 9/15. If wanted to file 5500 form, has to file on 9/15 (special extension) as no 5558 to extend to 10/15. Of course, it is assumed that s-corp tax filing is on extension. Full disclosure, not a fan of above but happened once or twice😁 CuseFan has made good points. But more and more I think and encourage, the clients should start the plans after year end as the census data would be final and available and also allow a better design than making one up during the year as census changes all the time. Just saying it.

The owners might not have very high compensation. If person's earned income for plan purposes is $85,000 it will be hard to get a maximum contribution with just deferrals and employer. If the owners have personal taxable investment accounts with large balances, its a way to basically transfer $70,000 from that account into a Roth account each year. And then instead of sitting in a personal taxable investment account, the money sits in the plan as roth and grows tax free. I'm not a big fan personally, but that's what I hear from some that use it for that purpose.