5330 - lost earnings and pyramid-ing.

[M Norton]

Plan sponsor missed deposits of some 2022 deferrals; they were deposited in early 2023.  We have calculated lost earnings and prepared Form 5330 to report and pay the excise tax on the lost earnings.  We do the plan administration annually.

According to the IRS forum from 3/24/2011 (posted online) they indicate lost earnings have to be calculated for the year in which the deferrals were late, and also for the year in which the lost earnings were deposited.  In fact, it uses a pyramid approach, such that you must deposit the lost earnings for the late deferrals plus the lost earnings for the prior plan year.  It sounds like you have to file two Forms 5330 for one delinquent deposit if the lost earnings were not deposited in the same year as the late deferrals.

How many Forms 5330 can be filed for the same plan in one year?

We have a client that is chronically late in making deposits.  So for 2022 we will report lost earnings on those late deposits of 2022 deferrals in 2023, then we will calculate lost earnings through the date of deposit in 2023, plus lost earnings on the 2022 lost earnings, plus lost earnings on late 2023 deposits.  Do we file a 5330 for the lost 2023 earnings on the 2022 deferrals deposited in 2023, and then another 5330 for lost 2023 earnings on late deposits of 2023 deferrals?

Trying to figure how how this is supposed to work. Any help appreciated.

[Bri]

Well, different 5330 reasons have different filing deadlines, and you're instructed to report all those with the same due date for the same plan on one form.

But as each year of the pyramid gives rise to a new PT, you might indeed submit a filing with "the new PTs for 2022" along with the "carried over (new) PTs as of 1/1/22 from 2021" on the same 2022 form.