We have a self-employed defined contribution money purchase pension plan with the ER as the only participant. The document states that the annual contribution shall be 23% of comp. However, the doctor/ER exceeds the annual compensation limit.

My question is this: If the doctor fully funds the pension, he exceeds the maximum annual addition of $40,000. But, if he only contributes $40,000, the pension account is not technically fully funded. Has anyone else faced this situation, and if so, how did you resolve it?

Doesn't the document further limit the contribution to the annual addition limit? I'd be surprised if if it didn't, in which case you are fully funded at $40,000.

Most likely a plan with a qualification letter has a provision such that (loosely phrased) "in no event will section 415 limit be exceeded". So common that it would be a shock if it's not in the plan document.