Lou S.

Sounds correct.

If he was a sole proprietor how do you know he worked 1,000 hours? If he accrued a benefit and there is a minimum funding requirement I'm pretty sure only the IRS can waive the minimum funding requirement.

I believe you are OK if you amend prior to any employee entering the plan (in this case 7/1) The one caveat I would have is if this is part of a safe harbor 401(k) Plan you might have a problem. But if you are worried and everyone is in their own group why not just change "testing compensation" to compensation while a participant?

I would refund it as a 415 excess under the theory that it was differed from pay not eligible under 415 and follow those rules for 1099-R coding and year taxable. But I could have an incorrect view on this.

You might have trouble opening an IRA for him but that's would be an issue with the custodian of the IRA and not an issue with the plan cashing him/her out.

Yes

You may have a few issues confused. If a participant goes from FT -> PT they remain a participant. The participant would be subject to whatever allocation conditions are spelled out in the plan. So if the plan has a 1,000 hours requirement to receive an allocation the participant would generally not be eligible for the allocation. It is possible that a participant who would not generally be eligible for an allocation may have to receive one if the plan is top-heavy or would fail some nondiscrimination test if the employee does not receive an allocation. This might be triggered by a "fail-safe" in the existing plan document or might require an amendment to the plan in some cases.

Sort of. "Pure" catch-up (not recharaterized catch-up) are NOT counted towards the "highest allocation rate" but catch-up contributions are considered part of the balance when figuring out the TH ratio. So in the case let's say the owner had $200K in pay for 2015 and 3,800 in deferral for a deferral rate of 1.7%. Let's also assume this is the first year of the plan and not using prior year testing. Further assume these are the only assets of the plan. HCE ADP = 1.7%, NHCE ADP = 0%; 2 times 0 = 0. So 100% of HCE balances need to be refunded to pass the test. BUT owner is catch-up eligible so no refund is made as 100% is recharaterized as cacth-up. Now looking at TH Key balance = 3,800 / total balance 3,800 = 100% > 60% so plan is top heavy. Since highest allocation rate of any key in my hypothetical example here is 1.7% then the TH minimum to non-Keys is 1.7% of pay.

Is this the first year of the plan? If so the determination date for 2015 and 2016 is 12/31/2015. But assuming this is an on going plan and is NOT TH for 2015 you are fine as you are. For 2016 assuming the owner now has more than 60% of the plan assets as of 12/31/2015 then the plan is TH for 2016 and deferrals count toward the "highest" allocation rate of any key employee. Any deferrals by the owner in 2016 will trigger some TH minimum.

We are taking the position that optional means "skip it".

Unless the plan is top-heavy, I see no problem at all. But if the owner is the only one deferring I'm going to guess the plan is probably top-heavy though I could be wrong on that.

No they can not. Employee deferrals that are refunded as part of a failed ADP test are still included in the employee's 415 limit.

Not 100% true. Eligibility is NOT a protected benefit. Now MOST of the time employees who enter under the old eligibility are grandfathered when eligibility if made more restrictive for PR purposes but it's not always the case. So in the OP example IF the participant's eligibility was grandfathered then she would be eligible for PS contribution. On the other hand if she was excluded when the eligibility changed she would have to satisfy the new eligibility to once again become a participant and would not be eligible for a PS contribution.

Prenup is preempted by ERISA no? I thought you needed a Postnupt (is that a thing?) to assign benefits to non-spouse.

Bird has it correct. You are no longer an EZ filer and even if the assets are under $250K you have a 5500 or 5500-SF filing requirement.

If it is a merger then the funds should come over by source. If it is a termination and participants are electing a rollover to new plan it should come in as rollover.

It is more than 5%. That said 180K in 2014 puts her over the comp limit and she is an HCE in 2015.* 124K in 215 also puts her over the comp limit and she is an HCE in 2016.* *Though it is possible you are using the top paid group election and she is over the comp limit but not in the TPG.

Are the SH match or SH non-elective? They could also have keys receive the TH minimum and everyone would get 3%. But yes your analysis seems correct on the after tax issue.

Subject to the timing of deposits rules for Simple plans I see no problem making a contribution for 2015 in 2016.

That true. Sometimes an inherited IRA is better but other times rolling it to your own IRA is better. Every situation can be different. An inherited IRA does retain the 10% penalty exception but treating it as your own sets up the RMDs on your own 70 1/2 schedule instead of the deceases spouse and gives the spouses beneficiaries more options. There are pros and cons to both.

She is the beneficiary? The payments wasn't in annuity status? Owners wasn't past required beginning date for RMD? In most cases, not a problem for spouse beneficiary to to roll to IRA.

I'm assume (and this could be a bad assumption) that the Key is Key by virtue of owning more than 5% of the and thus an HCE and that the spouse by attribution is also Key & HCE. I'm also guessing that this spouse was the only participant allowed in early but that there other similarly situated employees who were not allowed in. Are these correct assumptions on my part?

Yes.

You can exclude (some or all) HCEs from the safe harbor contribution in the Plan document. But if they aren't specifically excluded from it in the document you can't just decide not to give it to them.

Run, don't walk.