Participating Employer Question

We took over a 401(k) Plan with four physicians and about 17 employees. The plan sponsor is a corporation and each of the physicians is employed by their own corporation. Each physician corporation owns 25% of the plan sponsor.

The plan document lists each Physician's corporation as a participating employer stated as follows:

Notwithstanding Article XXX, the following will be Participating Employers in the ABC Corp Medical Group 401(k) plan effective January 1, 2025:

Corporation 1 Joseph Smith M.D., Inc.,  Corporation 2 ..............etc showing all four corporations.

Article XXX indicates that any related employer can adopt the plan as a Participating Employer by completing a Participating Employer Adoption page.

I don't believe any of the Physician Corporations executed a Participating Employer Adoption page but they are stated as Participating Employers in the plan document.

Even though physician corporations are listed as Participating Employers in the Plan document, this seems somewhat flimsy.

What we would like to do is have each Physician Corporation adopt the plan by completing a Participating Employer adoption page before September 15, 2026. They are then in-line with the Secure Act in adopting after the 2025 year end up to their extended tax filing deadline. They are currently on extension until September 15, 2026.

Anyone have any comments on this?

Thanks.

Did you ask the authors of your plan document?  (Relius?  Datair?  FTW?  Individually designed?)

If the retirement plan sponsor or any of the four participating employers gets its lawyer’s advice, letting that corporation follow its lawyer’s advice (if it can do so without interfering with the others) might be logically consistent for a service provider if it is not a law firm or other IRS-recognized practitioner and the service provider warns that it does not provide tax or other legal advice.

To the extent that any of the plan sponsor or a participating employer does not get its lawyer’s advice, caution to follow the text of the IRS-preapproved document seems wise.

The business format you describe—with each physician indirectly owning one’s stake in the shared firm through the individual’s corporation—suggests lawyers are (or at least were) on the scene. If you suspect the previous documenting about the participating employers was less than carefully considered, you might help some lawyers see caution. Professional-to-professional communication not in the client’s reading or hearing often is effective. Many good lawyers are glad to get a retirement-services provider’s knowledge and thinking.

This is not advice to anyone.

Managing plan documentation of related employers is one of those tasks that too often is not done correctly.  Congratulations on suggesting that the plan proverbially "dots the i's and crosses the t's".  If the physicians received contributions under the plan, then there definitely is a gap in the documentation.  If the physicians are not participating in the plan, then it is possible that they intentionally excluded themselves and are accumulating retirement benefits elsewhere.  @Peter Gulia 's suggestion to get a lawyer's advice from the business and each of the physician's will provide needed documentation both for now and for when, in the future, a service provider sees the disconnect in the plan documentation.

On a different but possibly a related topic, the arrangement sounds very much like there may be an affiliated service group.  This, too, should be documented.