Top Paid Group question

During 2019 there were 2 employees and one earned > HCE limit.

If we elect the TPG in 2020 , then there should be no HCEs in 2020 since we round down (2 x 20%)

Just want to confirm that there is no issue here since we are consistent with our rounding policy and that there is no rule we are not considering.

While I recognize that 1.414(q)-1T, A-3(b) allows any "reasonable" method, IMHO you are playing with fire by taking your interpretation. Good luck convincing an auditor that this is permissible. It isn't reasonable to abuse this discretion to blatantly ignore common sense coverage and nondiscrimination testing rules.

I'd strongly recommend that you reconsider this. Good luck!

No owners?

no owners is correct. 

I like Belgarath, I don't see a situation where the IRS would view rounding down to "Zero" as a reasonable method, even if you do it consistently.

Would your responses be different if we elected TPG mid year as a strategy to shift 10 of 15 HCEs to NHCE thus passing the test?

In the context of the original question, if your rounding method gets you to 1 or more, then at least theoretically ok. However, there are potential document and timing issues with the timing of the "election" and whether you can simply "elect" it or must amend plan, possible anti-cutback provisions (although I would say that's generally unlikely) - facts and circumstances issues to be determined for each plan.