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Sounds like they need a new TPA. If this had been one of our clients, they would have had the amendment and 2020 SH notice by today. The closer you get to 1/1/2020, you will have fewer people agree that the notice was provided a reasonable period before the beginning of the year.

You cant back date the notice or the plan document, and if that was the suggestion from an attorney, I would suggest finding a new one. Too late for 2020 SH? nope. Facts and circumstances will determine whether less than 30 days was a reasonable notice period.

Your comment in the first paragraph about him "transferring the earnings from company A to Company B needs to be challenged. That ain't legal! Since this is third hand: "I have a FRIEND.....", I wonder if you have the facts right? Company A has to file the appropriate tax return (sounds like a Schedule C) which will make the profits taxable to the 100% owner (Mr. X). If he then puts the money into Company B, that would have to be an after tax transfer (loan) to Company B from Mr. X. The whole question you are asking falls apart because your premise is wrong. How do you know (or how does your friend know) he is doing what you describe? Basically, if this is true, we need to know on what basis this is being done, but you are at least two steps removed from the situation so your knowledge is going to be limited I would assume. Yes, there are certainly controlled group issues (as Bird has noted), but I don't think this even gets that far. If she wants to put her job at risk, then she can call the DOL and complain that she isn't being covered by a retirement plan because her boss is practicing tax fraud! Probably won't go over too well with the boss.

What you've described is the classic reason that the controlled group rules exist. Some of your statements aren't quite right, e.g. "all employees within the brother-sister group have to be covered" really should be "all employees within the brother-sister group have to be included in testing" (which may devolve to the same thing but not necessarily). As far as "under what law" it is really several parts of the Internal Revenue Code. The question is how best to rat them out, and I don't have an answer. It is likely to become acrimonious at best. It's worth noting that a SEP can effectively have a three year eligibility period so she needs to be sure of her status before going too far.