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I think this is correct, but as a sanity check since it seems harder than expect to find authority on this - if a 401(k) plan is frozen, it's still permissible for participants to take out new loans and hardship withdrawals, correct?

I have a question regarding a safe harbor 401(k) established in August 2016. We set the effective date as of 1/1/16 to allow all enrolled employees at 8/1/16 the ability to receive a full year contribution into the plan. Prior to us establishing the plan, we had two employees terminate their employment (one in February and one in April of 2016). Now our Administrator is saying that because our effective date is 1/1/16, we have to provide a safe harbor contribution to the two terminated employees even though they were not employed when we established the 401(k) plan. Does this sound right? It does not make sense to me. Any help would be appreciated.

I am having a difficult time decoding how to distribute a loss. We have an employee with a $1,000 excess deferral. (I am using round numbers for sake of ease). We need to return this deferral to him along with any allocable income. Our ERISA attorney states that 'income' means losses as well as gains. The $1,000 excess was returned via a negative contribution on the payroll account. The rationale was that the w-2 needed to diminish his deferral by $1,000. The $1,000 deferral he put into his account shrunk to $900 as of the date of return. This $900 was moved out of his account into what we call the negative account at the recordkeeper. My thought is to now instruct the recordkeeper to move an extra $100 out of the account. This would in effect make the loss realized in his account, and thus would mean the loss was allocated (I think). Does this approach make sense?