Three strikes rule for ADP tests?

Hello! Long time lurker, first time poster. I'm still relatively new to the game but I've completed the requirements for my QKA and I know enough to know there's still a lot I don't know yet. 

We've taken over a plan and the plan contact informed a member of our admin team that their prior TPA had warned them of a penalty for the plan failing ADP testing for three consecutive years. I've not come across this in any of my studies so far, and I cannot find anything about it anywhere - not on ERISApedia, not on tag, google, IRS site, nothing.

Now, I know that the layperson generally has no idea what we're talking about when we discuss ADP/ACP testing or coverage or anything else, so the likelihood of the client having misunderstood something that the prior TPA said is certainly present. But have any of you ever come across this? If so, could you point me in the right direction?

Thanks!

No such thing.

We have plans that fail every year and take HCE refunds every year.

Wow!

Good thing they now have a new TPA.  For poops and giggles, I'd have the client go back to the prior TPA and ask them what the penalty is (and for maybe a cite).  Have them say the new TPA doesn't know what they are doing and they want some clarification.

Thanks y'all! 

I would recommend clarification on the wording.  I have had clients and contacts misinterpret what previous TPAs had meant on take-over cases.  Maybe the prior TPA had said there are penalties due for the last 3 years for not making the correction timely after the plan year end for all 3 prior years.

shERPA, unfortunately I have more of a back-office role, so I don't have direct client contact all that often right now. I'm sure the sales team and administrative leads have heard lots of great things like that though!