Subscribe (Free) to
Daily or Weekly Newsletters
Post a Job

Featured Jobs

Retirement Plan Administrator

Nicholas Pension Consultants
(Remote)

Nicholas Pension Consultants logo

In-house Counsel, Legislative and Regulatory Advisor

Cheiron, Inc.
(Mc Lean VA / Charlotte NC / Chicago IL / CA / MD / NJ / NY / PA)

Cheiron, Inc. logo

Quality Control Specialist

Pentegra
(West Harrison NY)

Pentegra logo

Defined Benefit Consultant

AimPoint Group
(Remote)

AimPoint Group logo

Senior Defined Benefits Consultant

Loren D. Stark Company
(Remote)

Loren D. Stark Company logo

Defined Contribution Consultant

AimPoint Group
(Remote)

AimPoint Group logo

ESOP Administrator

Blue Ridge ESOP Associates
(Remote)

Blue Ridge ESOP Associates logo

Compliance Specialist II

EPIC Retirement Plan Services
(Remote / AL / AZ / CO / CT / FL / GA / IA / IL / IN / MA / MD / ME / MI / MN / MO / NC / NE / NH / NV / NY / PA / SC / TN / TX / UT / VA / VT / WI / WY)

EPIC Retirement Plan Services logo

Plan Document Specialist

The Ryding Company
(Remote / CA / HI / NC / NY / PA / TX / UT)

The Ryding Company logo

Experienced Retirement Plan Administrator

Karel-Gordon & Associates
(Remote / Deerfield IL)

Karel-Gordon & Associates logo

Documents and Operations Coordinator

Jordan & Associates Retirement Services
(Remote / Santa Rosa CA)

Jordan & Associates Retirement Services logo

Retirement Plan Administrator

The Nolan Company
(Remote)

The Nolan Company logo

Retirement Plan Administrator

PPG Retirement Plan Services, Ltd.
(Remote / Kenosha WI)

Associate General Counsel

Central Pension Fund of the IUOE
(Washington DC)

Client Service Specialist

EPIC Retirement Plan Services
(Remote / AL / AZ / CO / CT / FL / GA / IA / IL / IN / MA / MD / ME / MI / MN / MO / NC / NE / NH / NV / NY / PA / SC / TN / TX / UT / VA / VT / WI / WY)

EPIC Retirement Plan Services logo

View More Employee Benefits Jobs

Free Newsletters

“BenefitsLink continues to be the most valuable resource we have at the firm.”

-- An attorney subscriber

Mobile App image LinkedIn icon
Twitter icon
Facebook icon

BenefitsLink > Q&A Columns >

Who's the Employer?

Answers are provided by S. Derrin Watson, JD, APM

On-Call Fees As an ASG With Professional Practice

(Posted April 24, 2019)

Question 343: Four doctors (obstetricians) jointly own a professional corporation that's a normal medical practice. It bills patients and pays a salary to the doctors and staff. But each doctor also gets paid by a local hospital for being on call for services at the hospital, getting an annual Form 1099 with respect to that income. If a doctor delivers a baby at the hospital while on call, the professional corporation bills the patient. Can an individual physician adopt a SEP based on his or her hospital income, and also participate in a 401(k) sponsored by the professional corporation?

Answer:

Of course they can set up a SEP to provide retirement contributions relating to the on-call fees. The real question, however, is whether the SEP must cover the employees of the professional corporation. If the sole proprietorships (the individual doctors receiving the 1099 income) are in an affiliated service group with the professional corporation, the SEP must cover all ASG employees who satisfy the eligibility requirements. 

Suppose we treat Doctor X (one of the shareholders) as an A-Org and the corporation as a first service organization. Both are in the field of health, and so both are service organizations.The doctor individually is a shareholder in the corporation, so the ownership requirement is satisfied. The only remaining question is whether X's sole proprietorship regularly performs services for the corporation or is regularly associated with it in providing services to third parties.

I view Doctor X and the corporation as regularly associated in providing services to third parties. The hospital isn't paying the doctor simply to answer the phone. If a patient comes in ready to deliver a baby and the patient's own doctor is unavailable (or the patient does not have a doctor in the area), the on-call physician steps in. And that generates revenue for the professional corporation. It is fairly easy to argue a link between the two. Perhaps if the revenue that flowed to the corporation from the doctor being on call were trivial, one could argue that they were not "regularly" associated, but the threshold here (while a judgment call) is fairly small.

The questioner had a second question. Suppose the two businesses were not related. Would the doctor have a single 415 limit between the two plans? No. The doctor could easily get total contributions of $15,000 in the SEP and $50,000 in the 401(k) plan, for example. But if the businesses are in an ASG, then there is a single 415 limit.

Chapter 13 of my book, Who's the Employer, discusses affiliated service groups at length. The 7th edition was released today, and I am delighted it is available. Click here for more information.


Important notice:

Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner or to readers. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of this and similar situations.

The law in this area changes frequently. Answers are believed to be correct as of the posting dates shown. The completeness or accuracy of a particular answer may be affected by changes in the law (statutes, regulations, rulings, court decisions, etc.) that occur after the date on which a particular Q&A is posted.


Copyright 1999-2017 S. Derrin Watson
Related links:

(restricted access)

(restricted access)

© 2022 BenefitsLink.com, Inc.