Form 5330 for multiple years of late deferrals

[AKconsult]

We were recently hired to replace client's TPA. The client was audited by DOL in 2012 and found to have late deferrals for 2010, 2011 and 2012 which totaled about $80,000. Interest was calculated and deposited to plan in 2013 with DOL approval. Interest due was around $850. DOL gave client letter that case was closed and they would take no further action.

When TPA prepared 2012 5500, they showed the late deferrals on Schedule H. No late deferrals were shown on 2010 or 2011 Forms 5500. The former TPA also filed an extension for the 2012 Form 5330. So, it is now due on 1/31/14. Client has asked us to prepare the Form 5330.

Questions:

Should we just prepare a 2012 Form 5330? Since the interest didn't get paid until 2013, I think that a 2013 Form 5330 is due as well, since the error isn't considered to be fully corrected until 2013.

What about 2010 and 2011? Client doesn't really want to go back and file 5330 for those years and I guess the IRS won't be looking for it, since the 5500s for those years don't show any late deferrals.

[shERPA]

The late deferrals constitute a separate prohibited transaction in each year, so a 5330 is due for each year. Additionally, each year the PT compounds. IOW the late deferrals in 2010 are a PT in 2010, and since they are still outstanding in 2011 there is a new PT in 2011 for the 2010 employer's use of the deferrals as well as a separate 2011 PT for the employer's continued use of the 2010 deferrals in 2011.

I believe the IRS considers the PT ongoing until fully corrected with both deferrals and interest deposited to the plan, however I've seen others treat the PT as corrected when the deferrals are deposited. If you run PT and excise tax calcs on the interest, at some point the excise tax reaches ridiculously tiny amounts where the client will question your heritage, competence and sanity when they are presented with a 5330 for $0.03 (and a bill for 1000x that amount). But be aware according to the IRS phone forum on 5330 preparation from two or three years ago, there is no minimum threshold for filing the 5330.