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ERISA-Bubs

2008-113 Corrections - Interest goes to Employer?

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Under certain corrections under 2008-113, an employee is required to repay amounts erroneously paid to the employee, including interest.

The correction procedure specifically says the employee should have a legally binding right to the amount that had been erroneously paid, but doesn't say what happens to the interest. Does the employer just get to keep this amount? I realize that the penalties under 409A fall on the employee, but I fail to see why the employer should benefit from the failure.

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In the land of the theoretical, if the company advances cash to an employee and the employee pays it back, it's technically a loan. To avoid an interest-free loan, you have to use a real interest rate and have the employee pay real interest. In this light, the interest isn't a windfall.

On the whole, I'd rather pay a little interest on the advance payment than have full 409A violation on my entire balance.

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Under certain corrections under 2008-113, an employee is required to repay amounts erroneously paid to the employee, including interest.

The correction procedure specifically says the employee should have a legally binding right to the amount that had been erroneously paid, but doesn't say what happens to the interest. Does the employer just get to keep this amount? I realize that the penalties under 409A fall on the employee, but I fail to see why the employer should benefit from the failure.

Yup.

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