affliated service group

[eilano]

A CPA has a Dr. client, Dr. P who has his own retirement plan. The Dr. is a 14% owner of a Medical Practice which does not have a plan. The staff employees are leased through a PEO and have a 401(k) plan through the leasing company. The CPA is not sure of the rest of the ownership of the Medical Practice but Dr. P has a monthly draw from the Practice to his corporation from which pays himself and his expenses (auto, etc.). Dr. P sees all his patients through the Medical Practice. His current TPA tells him that there is no problem with this arrangement. We do not agree. Am I missing something here? Thanks...

[alanm]

I don't think you are missing anything, the PEO is. The Doctor will probably be deemed an employee of the practice and must aggregate his plan with the PEO plan for testing-if audited. Typically, Doctors try to 1099 their own corporations and isolate the staff in another plan so they don't have to contribute as much to them. The affiliated service rules are used to prevent this situation.