VCP for 401(a)(4) failure--can't make complete correction?

[Guest Penelope]

Having trouble getting the Service to let us do the right thing!

We filed a VCP application to correct a 401(a)(4) failure for a small MPPP maintained by a subsidiary of a much larger group, which tests on a 3-year cycle. Two years ago, when we filed, we had testing data for 2004-2006 and proposed to add participants for the 2005 and 2006 plan years. We froze the plan in 2008, but knew we would have the same problem for 2007 and 2008, so planned to keep the added participants in the plan and make contributions for those years as well.

Now the Service is telling us that the amendment to add the new participants must be limited to 2005 and 2006, unless we revise our filing to include later years. The problem is that the controlled group testing for 2007-2009 did not include our little plan, since it was frozen. To do the testing for this plan alone would cost more than the correction amount.

I don't think we can go ahead with the VCP for 2005 and 2006 and rely on self-correction for 2007 and 2008, since this is a demographic failure and the two-year period is up for 2007 anyway. Any thoughts about what to do?