Voluntary Compliance w/r/t a 412i plan

[Gary]

I have a client (I took over in 2004) that implemented a 412i plan back in say 2000.

The plan they implemented was a 100% life insurance plan that clearly violated the incidiental death benefit requirements and thus many other qualification issues. The client was aware of this, but prospectively chose to handle new participants more in line with the rules, such as limiting the insurance premium to 50% of the employer contribution, but made no change to its original participant.

The IRS will not allow the plan sponsor to enter its national global settlement program for 412i plans and the plan will thus likely be subject to a full local audit and be disqualified.

Does anyone have suggestions as to how this situation can be remedied in some fashion? That is, pursuing a voluntary compliance intiative of some sort or somehow minimize the damages?

I can come up with a suggested solution that essentially converts the plan to a standard 412 insurance funded plan where a side fund is established and ultimately consists of at least half the costs, and perhaps the insurance is converted to a paid up policy thus lowering the death benefit and not requring future insurance premiums.

Of course my main question is what can be done with the IRS to get on track, before a specific approach is even relevant?

Thanks.