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Seems like you may have multiple plan years of concern (since 2008?). It would be prudent for sponsor to consider getting advice from ERISA counsel.

Are you saying that you have been sitting on the requested information for months or that the DOL has been and now wants further information on an instantaneous basis? Grammatically, your question implies the former. If the DOL had been given information on a timely basis but now wants more, is there no method to request an extension?

Have you had an expert run the Average Benefits Test? Based solely on what you say I, for one, am not comfortable relying on your statement that the plan fails coverage.

Perhaps this is an opportunity for BenefitsLink readers to ask ourselves a professional-conduct question: If a retirement plan's sponsor prefers not to correct the plan's tax-qualification defects, may a practitioner: (1) inform his or her client about the exposures, risks, and consequences [see 10 C.F.R. 10.21]; (2) insist that the practitioner will not sign or otherwise be associated with a return or report that is less than complete and accurate; (3) do nothing else (if his or her client does not ask for further work)?

Maybe a stupid question -- > Is the person actually eligible to participate in the plan? Are they truly an employee of the company? I am trying to figure out how you have an employee whose only W-2 income is an auto reimbursement? How else are they paying wages/commission? Or is he/she deferring 100% to a non-qualified compensation plan? I also work on the payroll side and don't see how this could happen since the reimbursement usually is not an eligible wage code, but rather more like imputed income.

Yes I would agree she get a safe harbor of 3% of $0 comp from DOE to PYE and then she needs to get 3% of 415 comp for full year to satisfy TH minimum which can be reduced by the $0 she received as a safe harbor contribution.

I don't think it is possible to defer from imputed income. If plan defines comp as W-2 you may have a problem since s/he is eligible to defer from W-2 comp but can not. Your solution is (or would have been) to exclude fringe benefits from definition of comp for deferral purposes.