Unintentional Control Group Consequences

Hello All:

We are talking with a prospective client(s) that we've identified as having a control group problem between two entities (one with a 401k, one without) that they are not aware of yet.  Before we recommend they fork out for an ERISA attorney to spell out their options, I'm curious what others have seen in similar situations?

Obviously the cleanest option is to bend the knee the file under VCP/VFCP. However, for businesses that don't or didn't otherwise qualify as a QSLOB and had not identified this issue over a period of many years and many employees as in this case, even remediation prior to an audit can be harsh and a business decision might need to be addressed between compliance and continuity. Open to any thoughts or experiences anyone has to share!

FYI I am not a TPA, but based on personal experience I am not surprised this issue wasn't addressed over the years by the existing bundled recordkeeper/administrator solution. 

Thanks in advance for sharing.

When taking into account all employees of the controlled group, does the plan pass coverage testing?  Or is it a worse problem, like the plan document is “standardized”?

The first step is to collect and fully analyze the facts, including the recordkeeping agreement with existing recordkeeper. I would tell them they need an attorney to do that.