Participating Employer Agreement for QSub

Under the terms of the 401(k) plan document, a related employer must complete a participating employer adoption page for employees of that related employer to participate in the 401(k) plan.

The 401(k) plan sponsor is an S Corp, and employees of a QSub of the plan sponsor also participated in the 401(k) plan but a participating employer adoption page was not completed for the QSub.

We know that a QSub is disregarded for federal tax purposes because its assets, liabilities, and items of income, deduction, and credit are treated as owned by the parent S corporation, so this may make sense.

Has anyone else seen a QSub participate without completing a participating employer adoption page?

If the intention of the plan sponsor is to have the employees of the Q-Sub participate in the plan, and if the plan document does not provide that all affiliated employers are deemed to have adopted the plan (i.e., it requires members of a controlled group, etc. to explicitly adopt the plan) then have the Q-Sub explicitly adopt the plan. It can't hurt and it can only help.

If they don't want the employees of the Q-Sub to participate, then add them as an excluded class of employees in the plan document. Maybe it's not strictly necessary, but again it can't hurt and it can only help.