Artie M

Agree with above....A distribution can only be taken if their employment has been terminated due to a permanent layoff, not a temporary layoff with a reasonable expectation of being called back to employment.

I haven’t looked at this in ages but here is my concern. I believe you need to make sure that the $12,000 you are crediting as earnings as of 12/31/2025 ($62k-$50k) is no less than the amount of earnings you would credit if you used the applicable AFR for the period from the date of the original deferral to the vesting date. Your stub year calc methodology looks reasonable. I looked at a document I have on this and, at least at the time we looked at it, there was not a ton of authorities out there to review (I didn't look to update this). I pasted authorities from that document down below. In each of the authorities listed, it appears that the operative term under each is the “amount deferred”. So our interpretation was that if you use the lag method and pay on the later within-3-months’ date, earnings are calculated from the date the original amount was deferred through the date of payment, compounding annually using the AFR for each January during this period. The parenthetical under Ex. 4 seems to support this interpretation also. Not advice, just my thoughts…. Treas. Reg. §313121)v)(2)-1(f)(3) states: Lag Method. Under the alternative method provided in this paragraph (f)(3), an amount deferred, plus interest, may be treated as wages paid by the employer and received by the employee, for purposes of withholding and depositing FICA tax, on any date that is no later than three months after the date the amount is required to be taken into account in accordance with paragraph (e) of this section. For purposes of this paragraph (f)(3), the amount deferred must be increased by interest through the date on which the wages are treated as paid, at a rate that is not less than AFR. If the employer withholds and deposits FICA tax in accordance with this paragraph (f)(3), the employer will be treated as having taken into account the amount deferred plus income to the date on which the wages are treated as paid. Treas. Reg. §313121)v)(2)-1(f)(4) Examples: Example (1). (i) Employer M maintains a nonqualified deferred compensation plan that is an account balance plan. The plan provides for annual bonuses based on current year profits to be deferred until termination of employment. Employer M's profits for 2003, and thus the amount deferred, is reasonably ascertainable, but Employer M calculates the amount deferred on March 3, 2004, when the relevant data is available. . . . . Example (4). (i) The facts are the same as in Example 1, except that an amount is also deferred for Employee B which is required to be taken into account on October 15, 2003, and Employer M chooses to use the lag method in paragraph (f)(3) of this section in order to provide time to calculate the amount deferred. (ii) Employer M may use any date not later than January 15, 2004, to take the amount deferred into account (provided that the amount deferred includes interest, at AFR for January 1, 2003, through December 31, 2003, and at AFR for January 1, 2004, through January 15, 2004). Preamble to the Final Treas. Regs. Under 3121(v)(2) (TD 8814) At page 18, states: Further, the final regulations provide that, under the second alternative method, the lag method, an employer may treat the amount deferred on any date as wages paid on any date that is no later than three months following the date the amount deferred is required to be taken into account. In addition, in response to comments, the final regulations simplify use of the lag method by permitting the FICA tax due to be calculated using a fixed rate of interest, not less than AFR, rather than on the basis of income under the plan. Text accompanying footnote 2 states: Alternatively, FICA tax payment can be postponed by treating the entire amount deferred as if it were deferred on a date that is within three months of the date the amount is otherwise required to be taken into account, provided that the amount deferred is increased by interest at the applicable federal rate (AFR) until it is included in wages.

I don't understand. How is it a 411d6 protected benefit? 411d6 protects accrued benefits, early retirement benefits, and certain optional forms of benefit distributions. AE is not a benefit within the meaning of 411d6. It's just a feature of how contributions begin where employees can always choose to stop contributing or opt out. (and frankly I don't see it as a BRF either). my 2 cents... which are frankly not worth much anymore... if ever.

most of our clients use 10 or 15 years... can't tell you why. The recordkeepers probably have more info on this topic.

Perhaps you can escheat it to the State. Generally, state escheat laws are preempted but the DOL has a temporary enforcement policy that allows escheatment of $1,000 or less provided the plan fiduciary follows specific guidelines, including conducting a good-faith search for the participant. See https://www.dol.gov/agencies/ebsa/employers-and-advisers/guidance/field-assistance-bulletins/2025-01. Many State unclaimed funds do not require a Social Security Number. Ask your lawyer....also might need to amend your termination amendment.

If the employer adopts an alternative defined contribution plan within 12 months after all distributions from the terminated plan.... (assume more than 2% of employees will participate). Treas. Reg. 1.401(k)-1(d)(4)(i) states: No alternative defined contribution plan. A distribution may not be made under paragraph (d)(1)(iii) of this section if the employer establishes or maintains an alternative defined contribution plan. For purposes of the preceding sentence, the definition of the term “employer” contained in §1.401(k)-6 is applied as of the date of plan termination, and a plan is an alternative defined contribution plan only if it is a defined contribution plan that exists at any time during the period beginning on the date of plan termination and ending 12 months after distribution of all assets from the terminated plan. However, if at all times during the 24-month period beginning 12 months before the date of plan termination, fewer than 2% of the employees who were eligible under the defined contribution plan that includes the cash or deferred arrangement as of the date of plan termination are eligible under the other defined contribution plan, the other plan is not an alternative defined contribution plan. In addition, a defined contribution plan is not treated as an alternative defined contribution plan if it is an employee stock ownership plan as defined in section 4975(e)(7) or 409(a), a simplified employee pension as defined in section 408(k), a SIMPLE IRA plan as defined in section 408(p), a plan or contract that satisfies the requirements of section 403(b), or a plan that is described in section 457(b) or (f). If ABC terminates its plan pre-closing, distributes funds, and joins the DEF plan post-closing (assuming the adoption of the new plan is within 12 months from the final distribution of funds of ABC plan), the DEF plan will be a successor plan such that the funds distributed due to the termination of ABC plan would be impermissible distributions under the -1(d)(4)(i).

Not sure how the timing rules work here. See 1.414(v)-1(c)(3). "For purposes of determining the maximum amount of permitted catch-up contributions for a catch-up eligible participant, the determination of whether an elective deferral is a catch-up contribution is made as of the last day of the plan year (or in the case of section 415, as of the last day of the limitation year), except that, with respect to elective deferrals in excess of an applicable limit that is tested on the basis of the taxable year or calendar year (e.g., the section 401(a)(30) limit on elective deferrals), the determination of whether such elective deferrals are treated as catch-up contributions is made at the time they are deferred." Assuming 2026 is considered the year of deferral, it could be reported on the 2026 Form W-2.

This would be an issue. You can terminate the target plan because it was maintained by a different Employer (capital "E" controlled group employer). The buyer adopting the target would have a second plan (the alternative defined contribution plan) of the same employer (don't even have the controlled group issue).

Question 1. Depends. A fiduciary of an ERISA governed plan may eliminate a group annuity contract (GAC) and not breach their fiduciary duties, even if the participants incur large losses. However, this is a legal question that depends on the facts and circumstances and would only be answered after a participant files suit and there is a determination in court. Here, where the plan sponsor by its actions is going to create large individual losses, you friend should be taking all actions necessary to minimize the risk of a finding of breach of fiduciary duty. Your friend needs to be able to show that he fulfilled his ERISA fiduciary duties. He can’t just say I don’t like the GAC and I want mutual funds. He has to show that he conducted a prudent and detailed analysis of whether surrendering the GAC and paying the surrender charge is in the best interest of the participants as a whole, taking into consideration the current market and participant needs. He should do a detailed comparison of the various alternatives, i.e., holding the GAC, a partial surrender, total surrender, costs of other investments, etc.. It is a given that he must show that he followed all the plan provisions and also the GAC provisions to ensure that the minimal surrender charges were paid. If possible, he should consult with an independent financial advisor/expert (preferably not the advisor he is moving to.. to avoid conflicts of interest) to ensure the decision was prudent and in the best interest of the participants. As with all fiduciary decisions, but especially here where there may a high risk of litigation (he is in essence creating a loss), he must be certain to document his decision (including detailed records of all the analysis performed, alternatives considered, the decision-making process, and the reasons for the final decision to surrender the GAC, etc.). Also, he should attempt to effectively communicate the change to the participants showing how it is in their best interest to do this. Of course, he has to walk a fine law … if he shows the GAC is such a bad deal someone might consider filing suit questioning the initial decision to put all the money in the GAC in the first place. Another option which many plan sponsors utilize when in this situation is simply freezing the GAC and redirecting new contributions into new investments, e.g., mutual funds. Here, he simply stops adding any more money to the GAC and in essence starts a new investment plan with the new mutual fund investment slate. At the point the GAC surrender period expires, he would terminate the GAC without the surrender charges and the GAC money would then flow into the new investments. Don’t know how long the surrender period is but at least for some of the money the participants will have more control. He may need to amend the plan for this. It doesn’t sound like your friend would want to do this but some plan sponsors will pay the surrender charges. Paying the surrender charges is more complex under the tax code and, if desired, your friend should consult an ERISA benefits attorney. see @CuseFan Question 2. This allocation should already be addressed in the plan and the GAC. All qualified plans must have “definitely determinable” benefits. Even though the funds are all invested in a single GAC, there should be current terms under which those funds are allocated to each of the participants. As you state, they are all getting statements now that track the amounts in the GAC allocated to each of the participants. The surrender charges would be allocated amongst the participants under a formula in the plan/GAC. There must have been participants who terminated employment and qualified for a distribution from the plan. How were their benefits determined? Overall, your friend should stay away from any type of modification or amendment of these provisions. Just thoughts...

This is a TL:DR post so sorry if I am repeating what someone else said... Q1a... don't see in the regs (or anywhere else) anything that permits the plan to recharacterize a "pre-tax catch up" election and deem it a regular pre-tax contribution. Once they hit the limit of $8,000 in Roth catch-ups they can no longer contribute any catch-ups. Since can't do any more catch ups, no pre-tax catch-ups either. Q1b... again, once they hit the $8,000 limit, how can they elect "pre-tax catch-up"?? Perhaps you mean they can go back an increase their regular pre-tax election but that is not what you are saying (or doing). Q2a, b, c... why do it that way.... Under your facts, their limit is $24,000 + $8,000. So, they keep contributing a $1,000 pretax and $1,000 Roth until week 16. At weeks 13, 14, 15, and 16 the $1,000 Roth deferral is converted to a $1,000 Roth catch-up (so $4,000 Roth catch up), also, at the end of weeks 13, 14, 15, and 16 $1,000 of the previously contributed regular Roths are now deemed Roth catch-ups (so additional $4,000 catch up after 4 weeks). Note, under the regulations, a spillover doesn't apply until (1) the HCI's YTD pre-tax deferrals reach the 402(g) limit or (2) the HCI's YTD aggregate (pre-tax and Roth) deferrals exceed the annual limit. And yes, you communicate to them that they can switch anytime... you may want to do follow-up communications. The key is simply communicating with the participants.

hmmmm.. @Peter Gulia I believe you are agreeing with my post (at least generally) and are providing more detail, but I am not certain.

There could be a more significant issue here. I think that this structure likely does not violate the indicia of ownership rules for plan assets under ERISA 404(b) but that probably should be analyzed. The bigger issue to me is that under the Code a plan is not tax-qualified unless its trust is a "domestic trust" under 7701 of the Code. Under the control test portion of the statute, to be considered a domestic trust, one or more U.S. persons must have the authority to control all "substantial decisions" of the trust. If an all-non-U.S. board is making the decisions for the plan, the trust could be classified as a "foreign trust". This would likely disqualify the plan for tax purposes.

This is an operational error for failure to carry out the terms of the plan (i.e.,, the election of the participant). As such self-correct by removing the contribution from the participant's pre-tax account under the plan and put it into a Roth account under the plan. No QNEC is necessary because you simply did not put it in the right account. (The employer had authorization to deduct the amount from their paycheck and the deduction was made.) Then, as @justanotheradmin suggests you must take care of the taxation aspect of the contribution to ensure the Roth nature of the contribution. The 1099-R as @justanotheradmin suggests would remove the issue of withholding and ensure its taxation but something about it seems a little distasteful as it was not the employee's fault (no election should be required for Roth treatment as it should have been a Roth from the beginning). Since this error likely occurred recently, I would likely suggest that the employer manually correct the payroll to reflect the proper income tax withholding (that means the correction would flow through to their W-2 for the year) and contribute the missed withholding for the employee as it was the employer's fault that withholding wasn't taken (of course, the employer could request the employee pay the required withholding or withhold amounts from the employee's next paycheck to cover the withholding but, if considering getting the withholding from the employee, just issue the 1099-R).

We prefer not to use the Social Security definition but prefer to line it up with the employer's basic long-term disability definition. The SS definition requires that they cannot "engage in any substantial gainful activity" and most of our clients do not use that strict of a standard. I have not run into your "equal protection" argument, but I can see where there is a concern (and perhaps gives us another con to the SS definition). Here is language we suggested under a Schwab prototype we recently reviewed. Of course, this assumes the Employer maintains a long-term disability plan (and that it is not self-insured/administered).

I don't believe there is a specific correction set forth anywhere to cover this situation (especially since the super catch-up rule is so new). However, it seems you could analogize to the situation where a plan did not offer the regular catch up to all of its employees. In such a case, the plan would be treated as a discriminatory plan and, unless corrected, the qualified status of the plan could be adversely affected. To correct this type of failure, it would seem that Plan A employer could self-correct under EPCRS generally by: providing the affected employees with the right to make the catch-up (it would be required as long as Plan B doesn't stop making the catch-up under its plan) and making QNECs to the affected employees to compensate them for their missed deferral opportunity (so likely 50% of the additional catch-up plus earnings). Otherwise, if Plan B agrees, they could utilize VCP and submit the retroactive amendment to the IRS for its approval. Note the IRS doesn't usually agree to retroactive amendments unless it increases benefits for plan participants--here, the request would include distributing the benefits of one group from the plan so their benefits will be being reduced. The client could go to VCP and propose any other correction it can think of... e.g., propose to simply amend Plan B to stop the catch-ups with no distributions. Here, it is likely the IRS would say no, unless Plan A gives the QNEC.

@RatherBeGolfing Just to be clear... optional aggregation is permitted in 3 circumstances stated generally as: (i) employers using a common paymaster (not that many employers actually meet the common paymaster rules because it should only cover "concurrent" employees), (ii) an employer and one or more other employers in a 414(b), (c), (m), or (o) control group, and (iii) for successor employers in asset purchase. See § 1.414(v)-2(b)(4)(ii), (iii), (iv) Federal Register :: Catch-Up Contributions Administratively it could be an issue where several controlled group members participate in the same plan and employees work across multiple entities in the controlled group or are transferred between the entities. Without aggregation, mid-year transfers could cause the employee's catch-ups to be characterized differently, so there will need to be more communications with the employees to minimize confusion. Certainly more reasons not to do this but it depends on the employer and their structure.

In my view, there isn't a stock answer to your question. Since your client is engaging a 3(16) fiduciary, they have a fiduciary duty to assess the potential risk of loss/costs to the plan that could result from the proposed 3(16) fiduciary's acts (or omissions). Without seeing the scope of the limitation of liability/indemnification provision or the scope of services they will provide under the agreement, not sure how one would quantify the limitation. I mean the agreement must be reviewed to determine what is the possibility of, and the maximum amount of, any potential loss for the plan based on the services provided and, perhaps, if these potential losses were to arise, what could be the additional administrative or other costs for any actions your client may have to take to mitigate/minimize the potential losses? (Editorializing here but honestly, many agreements that purport to be 3(16) agreements don't even provide the third-party being retained enough discretion to, and/or require any services that would, cause them to be fiduciaries). That said, the bulk of our clients are plan sponsors. We frankly invariably strike all this limitation language and advise our client to tell the proposed providers that they should ensure they have good enough E&O insurance to cover their negligence (and indemnity to us) and that they must provide the client with documentation indicating that they have an ERISA 412 bond that covers them separately with regard to their fiduciary acts involving the client's specific plan or one that covers theirs and the client's actions under the plan both but separately (i.e., with separate $ limits). Our clients generally stick with this and don't sign providers who will not "step up" if they are at fault. On the other hand, when we advise clients that are TPAs regarding limitations/indemnities, the form contract generally includes 1-year fee limits. These TPAs, though, generally charge much higher service fees (basis points type fees) than what your proposed provider is charging. Also, as with most indemnity provisions, this amount is almost always the subject of heavy negotiations and does not remain static... the agreed upon limits range from elimination of the limit to a multi-year limit to sticking with the original 1-year fee limit (here, the ultimate limitation depends on the scope of the work and the fees generated under the contract... how much do they want the business).

Note that for the 402(g) excess deferrals, earnings are only taxable in the year of distribution. The 1099-R for the year of deferral only includes the actual excess deferral amount, but the 1099-R for the year of distribution would include the amount of the excess deferrals and the earnings (calculated from the date of failure through the date of correction... hopefully there wasn't a loss as losses treated differently). The distribution of the excess amount contributed due to exceeding the plan limit does not have the same double taxation consequence for the participant but it would include earnings calculated for the period of the failure and the excess amount plus earnings would be taxable in the year of distribution. Since these distributions are taxable, the 1099-R should indicate they are not eligible for rollover etc. Also, these distributions may be subject to 72t penalties unless an exception applies, 20% withholding, and spousal consent, if required under plan. Any forfeiture of matches would include a forfeiture of related earnings calculated for the period of failure. Of course, any forfeiture of a match is not taxable to the participant and there is no 1099-R reporting requirement.

My response to the OP is the same as @Lou S.

I think like you, I am always hesistant to give anyone, employer or employee, any discretion under 409A. There isn't an issue regarding implicating the change in election rules because, from your facts, this involves an acceleration of the payment and not a delay. Under the structure of the change, the employer believes or has been advised that the at least 12 month delay in payment after an election coupled with the forfeiture if resign within that period constitutes a substantial risk of forfeiture for the short term deferral rules. This appears reasonable but it is not without risk. This goes back to the question under section 83 of how long must a service period be for purpose of this rule. Most think a year is reasonable but for many, many years conservative practitioners point to a two-year period as alluded to in the section 83 regs. This two-year period has been cited in several PLRs issued under 457 (e.g., 9211037). IRS personnel speaking at a conference I attended several years ago stated that (in his opinion, of course) the two-year rule was a safe-harbor and not necessarily a minimum. The PLR I parenthetically cite ruled benefits in a 457f plan vested immediately because the service period was less than two years. So there is a possibility the IRS might not agree on the 12 month period (also, the courts might not either... there is a tax court case out there involving a 12-month resale restriction on some type of property (not a service requirement) where the court held the 12-month period was relatively short and not substantial... people point to that case as support for this two-year rule... not sure if it really applies but its there). Also, the 12-month period must be for actual work and perhaps not some consultancy period (not a sure loser but a facts and circumstances issue) or where they use vacation for a significant period. My recollection was that the actual work requirement was problematic under some rulings.

Not sure how you would deal with this but I question a payroll system that has shortages and overages that can't be reconciled. Of course, I don't deal with this all the time so maybe it is not unusual but the accountant in me bristles at the notion... Note there are no de minimis exceptions for this type of error.

Neither the Code nor the Treas Regs under 72(p) require that loan repayments be accelerated at termination of employment. In addition, neither require that loan repayments must be permitted to after termination of employment. Hence, the need for the election you have noted. If the plan documents permit, loan repayments may continue to be made by the participants. But, previously loan repayments would have been made via payroll reduction and they would no longer be able to done this way. This would be require arrangements to be made with the recordkeeper for direct repayment via check or electronic payments such as ACH deduction from a participant’s bank account. That said, in the past, most plans and/or their recordkeepers wouldn’t, couldn’t, or just didn’t want to, go through the administrative expense of working with individual terminated participants on repayment arrangements (just as @Lou S. is saying), so they would require immediate payment upon termination of employment. Nowadays, recordkeepers are less reluctant (and plans seem to be neutral if the recordkeepers are okay with it). This is simply a contractual restriction of the plan and/or recordkeeper—again, it is not a legal restriction. However, the terms of the plan, loan policy documents or promissory notes must conform with the contractual loan restrictions. If they don't, the plan sponsor could be violating the Truth in Lending Act. Plan loans are loans (i.e., ERISA does not pre-empt the Truth in Lending Act rules that may be applicable). Also, if this box is checked or unchecked, the choice will affect how this loan is treated and whether a loan offset can be used. If this alternative is checked in the adoption agreement, the plan and the recordkeeper would not and could not permit terminated employees to continue to pay off outstanding loans, and the loan would be immediately due and payable upon termination of employment. Here, unless the outstanding loan balance is pre-paid (most plans or plan loan policies permit pre-payment) or paid within 90 days of termination, the outstanding loan balance would be reported as taxable income to the participant on a 1099-R. This is your loan offset. Unless an exemption applies, the outstanding balance would be subject to the 10% early withdrawal penalty. If the loan was in good standing on the termination of employment date, the participant could rollover the outstanding loan balance to another qualified plan or IRA (they would have to fund the rollover with their own funds) to avoid taxes and penalties, but the rollover would have to occur prior to the due date (including any extensions) for their tax return for the year of the loan offset. If the due and payable alternative is not checked in the adoption agreement (and the plan loan policies and any applicable promissory notes do not provide for acceleration of repayment), the employer would be violating the terms of the plan and likely the Truth in Lending Act, if it does not permit them to continue repaying the loan after their termination of employment. That is, the plan would not have a right to accelerate payments, to do a loan offset or to cause the loan to be defaulted (if they are willing and able to otherwise repay).

This would be viewed as failing to withhold deferrals from eligible plan compensation, which is considered an operational error and more specifically a missed deferral opportunity (i.e., plan participants missed an opportunity to defer amounts under the plan). The first method available to correct this error would be to provide the affected participants (1) a corrective contribution in the form of a qualified non-elective contribution (QNEC) that’s equal to 25%-50% of the missed deferral amount, plus (2) if the affected participant is eligible for matching contributions, 100% of any missed matching contribution determined using 100% of any missed deferral amounts (not the reduced 25-50% amount) plus (3) any investment earnings what would have been earned on the contributions made under (1) and (2), if any. It is likely the percentage used for the corrective QNEC will be 50% as it appears that the error may have started a while back, but it could be less if it has only been occurring for a short period. If corrected in this manner, the employer should be able to self-correct even if it has occurred for a long period of time, but that would only be if it meets the rules for self-correcting inadvertent failures. Otherwise, it would only be able to be self-corrected if the error has only been occurring for less than about two years. The other method to correct the error would entail adopting a retroactive plan amendment to conform the plan document terms to the plan’s operation using an amended comp definition excluding the items you enumerated from the plan’s new comp definition for the period at issue. If the employer chooses to correct through retroactive amendment, the correction would need to be to submitted to the IRS under VCP. To get the IRS to agree to the retroactive amendment under VCP the employer would need to explain the expectations of the affected plan participants with regard to these excluded items (here, that they did not expect these items to be included for salary deferrals and matching contributions, if any). This would have to be shown by submitting SPDs, election forms, data statements or summaries of benefits, statements, notices, employee communications, new hire enrollment materials, or any other documents that indicated that these comp items would be excluded for plan contribution purposes. If the employer does not have any documents to submit showing that the participants were informed that these comp items would be excluded, it is unlikely that the IRS would agree to the retroactive amendment and it would likely require contributions be made as described above. Note that retroactive amendments can be used to self-correct but only in instances where the retroactive amendment would increase the benefits for the affected participants. That would not be the case here. There could be another correction the employer could propose if a VCP is submitted... under VCP the employer can propose anything it is just whether the IRS would accept what is proposed (not sure what they would propose but maybe they can come up with something). Also, note that since 2022 VCPs cannot be submitted on an anonymous basis (though you could ask for a pre-submission conference to discuss a potential VCP submission without disclosing the employer’s name, etc. but those conferences are advisory only and non-binding). as usual, this is not advice....

For delinquent payments to a Plan trust, we only look to actual earnings if the delinquent payments constitute an operational failure as well as a prohibited transaction. Delinquent payments do not always constitute both. For example, if a plan is an individually designed plan that we prepare, the delinquent payments will not constitute an operational failure as we do not include the DOL timing requirements in our documents (i.e., it would not in operation violate a term of the plan). Also, many prototype plan basic plan documents do not include the DOL timing requirements so there would be no operational failure in those. If, however, there is an operational failure because there is a violation of the plan's terms, we advise providing participants with lost earnings in the amount of the greater of (i) the actual lost earnings computed as @Peter Gulia is suggesting and (ii) the lost earnings as computed on the DOL online calculator. The greater of amount is used to ensure that the correction meets both EPCRS and VFCP. However, this is extremely burdensome because when doing this the calculations have to be done on a per participant basis (while some affected participants may have had investment gains during the correction period others may have had losses so using lost earnings based on the DOL calculator for those with losses ensures that they receive some payment for the employer's use of the funds). Where the actual earnings are used for a participant's lost earnings, the VFCP submission would include a statement that the third-party recordkeeper has calculated actual lost earnings based on the participant's actual investments under the Plan from the loss date to the recovery date (or full payment date, if later, for earnings on earnings). This type of statement has never been rejected by the EBSA in a VFCP submission we have made involving corrections where there were both operational failures and prohibited transactions (this is not saying the EBSA wouldn't reject this type of statement on the next such filing we might submit). Note though that if the delinquent payments only constitute a prohibited transaction and not an operational failure, the VFCP guidance does not provide for the use of the participant's actual investment earnings as a methodology for calculating lost earnings (actual earnings would be required if restored profits is required but that would be based on the amount the employer earned by using those funds in a specific investment, etc.). The VFCP guidance requires lost earnings to be based on the Code's underpayment rates. A colleague noted to me that I put the link for the 2006 notice when I should have linked the 2025 notice. Sorry for that but note the substance is the same. Different subsection though §5(b)(6) instead of (5). See Federal Register :: Voluntary Fiduciary Correction Program As alluded to above, what one agent will agree to may not be the same as what another agent will require.... depends on if they spilled their coffee going into work that morning or some other arbitrary happenstance....

You do not have to provide the "actual" calculations but you must provide the methodology used to do the calculations, and the tools used. Question though, why aren't you using the Online Calculator? it is so much easier and often times yields a lower aggregate earnings amount. Plus you just have to check the box that states you used the Online calculator and provide the printable results page as noted by @Paul I above. This response assumes as stated in your question that this correction involves "lost earnings" (as opposed to restored profits). If you still want to use your own calc, the recordkeeper should confirm that its methodology conformed to the methodology required under the VFCP DOL notice and then provide the DOL basically a recitation of the methodology required under VFCP DOL Notice §5(b)(5) as the methodology used (again as confirmed by the recordkeeper). Federal Register :: Voluntary Fiduciary Correction Program Under the Employee Retirement Income Security Act of 1974 , along with some kind of statement like "The calculations of Lost Earnings as submitted herein were conducted using the proprietary software of our third party recordkeeper _________________, which ostensibly was designed utilizing the methodology described in the DOL Notice for use by its clients to comply with the VFCP." We did this before when one of the large actuaries did the calculation for one of our largest clients as part of a correction that included thousands of affected employees and many, many different corrective periods. If the recordkeeper won't confirm that it used this type of methodology, don't use their calculation.