We are working on a proposal for a New Plan. There are four employees (Owner, Spouse, and two NHCEs). The owner sold some assets of their business 6/30/2016 and terminated the two employees. They went to work for the firm who purchased the assets. The owners now would like to set up a plan effective 7/1/2016, covering only them. (They will have sufficient income in the short year to maximize their contributions). They are restricted from doing that because of 401(a)(4)-5 correct? or does that only apply to DB plans.
