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Either bring them in the DC.....or increase their DB accrual up to the gateway equivalent since it's probably not high enough to start with in the first place? Maybe check if these people are short-service enough to run in a disaggregated set of tests for the otherwise excludable? (Trying to think how the DB got the easier eligibility to get into, so maybe they use something less than the 410a max.)

You pass the 70% test so you are good. Even if you didn't I might argue for transition relief in 2023 to test the timing separately with respect to each group due to the business transaction. If this was on going, I'm not sure what the correction would be if you were failing the 70% test, but I'd guess giving lost earning to the annual deposit group due to timing would be an acceptable IRS fix.

Thanks again, Peter. I like that conclusion. I was hung up on the language at the outset of 408(h) which provides that it applies "for purposes of this section." However, there is also the last sentence that says the custodian will be treated as the trustee (which implies, at least to me, that the custodial account will be treated as a trust) "for purposes of this title," which would include 1563. I'm inclined to go with this analysis unless anyone else has other thoughts on this that they would be kind enough to share. Thank you again, Peter, for all of your help!

A sensible way to interpret § 1563(e)(3)’s reference to a trust might be to recognize that an IRA custodial account is a trust substitute. Internal Revenue Code § 401(f) treats a bank’s or trust company’s custodial account as a qualified trust if “the custodial account or contract would, except for the fact that it is not a trust, constitute a qualified trust under [§ 401][.]” Likewise, § 408(h) treats a bank’s or trust company’s IRA custodial account as an IRA trust. http://uscode.house.gov/view.xhtml?req=(title:26%20section:408%20edition:prelim)%20OR%20(granuleid:USC-prelim-title26-section408)&f=treesort&edition=prelim&num=0&jumpTo=true

My understanding is he would elect a form of payment that meets the RMD rules (does not extend beyond his life expectancy) and is allowed by the plan (is one of the optional forms with spousal consent or is the normal form if you don't get spousal consent) and you convert the account balance to an annuity in that form of payment using the Plan's actuarial equivalence factors.

About your description of the facts: You mention that the corporation’s president and secretary are trust beneficiaries. But are they the only trust beneficiaries? Are the two beneficiaries spouses? Are the two beneficiaries otherwise related? Is either of the two beneficiaries also a creator or grantor of the trust? Are both? Is the trust irrevocable or revocable? What rights (if any) does the trust’s creator or grantor have? Is the trust a grantor trust for Federal income tax purposes? Does a beneficiary have a withdrawal right? Does a beneficiary have a right to a current distribution from any portion of the trust’s income? Does a beneficiary have a right to a current distribution from any portion of the trust’s principal? Does a trustee have a discretionary power to distribute any income, or any principal, to a beneficiary? Do any of the trustee’s powers differ regarding the S corporation shares and the trust’s other investments? Do any of a beneficiary’s rights or beneficial interests differ regarding the S corporation shares and the trust’s other investments? Those and other facts might matter in how one translates trust powers and beneficial interests into deemed ownership of the corporation the trust holds. Consider 26 C.F.R. § 1.1563-3(b)(3)(i) https://www.ecfr.gov/current/title-26/part-1/section-1.1563-3#p-1.1563-3(b)(3)(i). This is not advice to anyone.