Should have been a multiple employer plan

Uh oh. Some brothers and sisters just found out, after ten years, that their companies are not a brother-sister controlled group. (No brother-sister aggregation for this test.)

They have always operated their 401(k) plan as if it were "single employer" with everyone getting the same contribution. The 401(k) and (m) tests were also operated on a "single employer" basis, which is the problem because those tests need to be company by company in a multiple employer plan. Maybe if they could find the data, the 401(k) and (m) tests would be passed. The document is set up since the begiinning of time as a single employer plan, also a problem.

Here's the question, and I am sure the answer is No, but it would be great to hear something different. Is there any permissive way that a plan can elect to aggregate as if it were single employer, even if there is no controlled group or affiliated service group but a family relationship among the owners?

If we define permissive as whatever the regulators agree to, then No could become a Maybe.  Do we miss the days of anonymous VCP?

What led the brothers and sisters to believe they could aggregate all of the businesses in one plan in the first place?  And how did they just find out they could not?  Hopefully, the answer is based on outside, allegedly credible advice and not because Mom said they had to all be together as a family.

The IRS and DOL like to say the ultimate goal of corrections is every participant at least winds up with the benefits the participant was entitled to had the plans operated properly.  If the data are available, then a massive rebuild of the plan accounting is possible but likely not very practical.

You could try to build a case for being allowed to separate the plan into multiple plans based on existing individual account balances grouped by the company each individual works for currently.  You would have demonstrate that the allocations formulas were uniform (like NECs allocated over compensation), and there are not distortions like using the top-paid group rule for determining HCEs.  The trust similarly would be treated as a master trust with a separate accounting for each company.  Hopefully, you could get a pass on fling historical 5500s and be allowed to treat the new plans as spinoffs.  I doubt it, but why not shoot for the moon?

Hopefully, the tax deductions for the contributions to the plans correlated to the contributions allocated to the employees of each company.

If the current situation honestly was the result of ignorance and the end result is participants are made whole, with some hope and a prayer this could fly.