Angershark

I know this is an older thread but hope you saw this just happened last month and begins in March I think.

Pretty much as the title says. While filling out a VFCP, I discovered that lost earnings were paid out of that year's forfeitures. Ok by IRS, not so much under VFCP. Does anybody have any experience with this or how to correct? My thought is to make an additional employer contribution to plan participants for that year in the amount used but will the DOL accept that and still accept the VFCP application? We could then show that the lost earnings were funded by the forfeitures but this was corrected (to include lost earnings on that amount as well) and the costs ultimately came out of employer funds and not plan assets.

Actual rate of return is all I can think of but that is a wide disparity in earnings between 40,000+ and 9,000 in late deposits and virtually the same recovery date. As far as why, they used the TPA for the 5330's then somehow DOL got wind and "encouraged" them to apply through the VFCP and they brought it to us. Either way I still need to correct the 5330's for compounding and get documentation from the TPA on how they came to their calculations.

So I recently received a request to assist with a VFCP application. I was provided the total of missed deferrals, payroll date, recovery date, distribution of lost earnings and 5330s. The failures occurred one in 2022 and twice in 2023. The 5330 for 2022 is very vague and doesn't include the correct dates, but the amount used to calculate the excise tax doesn't match the VFCP calculator with the actual recovery and final payment dates OR even if I used the recovery date as the final payment date. The 5330 for 2023 only includes one item which I can only assume adds the 2022 number to the lost earnings for 2023 instead of breaking them up by transaction and compounding the total, but this total is still off from what the calculator shows. The lost earnings summary for 2022 matches the 5330 for participant allocations, but so does the 2023. I mean that the entire amount of what I believe was the combined lost earnings was allocated to participants in 2023. I'm trying to get in touch with the TPA to see who taught them to fill out 5330s and how they came to their calculations. Regardless, it seems like the sponsor overpaid lost earnings by a around $100. I can't use their documentation and evidence because it won't match the calculator so it looks like I have to redo everything including the 5330's. DOL hasn't started an investigation yet but has sent a few "poke the body" notices. Does anybody have any other suggestions? And if I'm right and they did overpay lost earnings, is that a prohibited transaction in itself that needs correcting? We're talking a few pennies for the majority of participants and most aren't employed there anymore.

Thank you all!

Hi All, I'm a relatively new EB/EC attorney and looking to increase my knowledge of ESOPs; how to create, administer, etc. Do you have any recommendations for secondary sources, guidebooks, etc. to help me learn more? Thanks in advance.

@CuseFan, I think that's right and the HCE was the part that was tripping us up. Either the entire matching scheme will need to pass as a NSH or only offer to NHCEs. Thank you.

Hi All, Saw a thread on here about 20 years old but curious if the theory still holds up. Company has 4 divisions, A, B, C, and D under 401(k)(13) safe harbor plan. All divisions receive the QACA safe harbor match. Company wants to make only Division D eligible for an additional/enhanced match. Can this be done? If Division D passes 410(b) on its own, the benefit passes 401(a)(4) inside of Division D, and the benefit passes 401(m) inside Division D, is this allowable with a plan/spd amendment? Any other concerns or things I'm missing (i.e. does a test need to be for the controlled group as a whole vs just division d)? Thank you in advance!