I am helping a small employer with DVCP and EPCRS correction programs after realizing that no 5500s were submitted, and prototype plan was never updated since 2002 (they *did* manage to get a good-faith EGTRRA amendment done in 2002).

Now it comes to light that, although ADP testing is required, it hasn't been performed.

All of the correction guidance refers to late corrections/contributions in connection with testing, but not to just missing testing all together.

I have advised client that testing is a core qualification requirement, and that testing back to 2002 needs to be performed now. If plan would have failed for any year, proper correction needs to be made now.

Then at least we have records to show tests were run, if ever requested, and we get the plan into true compliance.

My thought it, if plan would have passed for all years, we note in the EPCRS submission that it passed for all years (no details).

I expect client to think that this is a lot of work, but I've advised that terminating the plan (i.e. to avoid the work) is also not a solution, as terminating plans must be compliant.

Now that they have their TPA issue sorted out (years ago, a co. employee failed to pay the TPA's bill. TPA then 'resigned', but that employee didn't mention it, and left the co. TPA still answered questions, and even sent forms and assisted recordkeeper when regularly contacted by client, so client was surprised to learn, recently, that TPA wasn't 'really' their TPA, but rather sort of performing pro-bono type help here and there.

Anyway, does my advice to client on need to run prior testing seem right? I can't see any other option, but it's helpful to have a reality check, and/or to know if anyone else out there has ever seen a plan miss testing all together for several years...?

I think you have it right, but I would word part of it a little different. Passing the tests is the qualification requirement. Of course, you don't really know if you pass unless you run the tests. If they pass all the testing, it sounds like your EPCRS filing will just be a VCP nonamender filing. Testing isn't part of that, so I wouldn't mention it in the filing. I agree that they need to correct this even if they are terminating the plan.

If they do fail testing for one or more years, make sure you fix it before doing your filing. You should also check for other problems. It's a lot more expensive to fix if it comes up later. We had a company come to us a couple of years ago after being found to be a nonamender in an IRS audit. It cost him $6,500 in penalties. It would have been a $375 filing fee if he had done it on his own before being selected for audit.

What was this, the Bret Favre version of a TPA? If you resign and you get another request to do work, send another copy of your resignation letter!