Late deposit of deferrals - DOL Correction of earnings

[Guest philc]

It seems as though the DOL has changed the determination for "lost earnings" on late deposit of deferrals under VFC. Rather than the "greater of ..." method, the IRS deficiency rate under 6621 is to be used - as built into their VFC online calculator.

Is this an acceptable correction of lost earnings to the IRS? Late deposit of deferrals is also an operational error and if corrected under EPCRS and the principle is to essentially to put the plan (participants) in the position it should have been in had the error not occurred, it seems the adjustment for earnings just based on 6621 may not do that.

Is there a disconnect between what the DOL allows and what the IRS requires? How are others calculating earnings on these late deposits?

[401(k)guru]

It seems as though the DOL has changed the determination for "lost earnings" on late deposit of deferrals under VFC. Rather than the "greater of ..." method, the IRS deficiency rate under 6621 is to be used - as built into their VFC online calculator.

Is this an acceptable correction of lost earnings to the IRS? Late deposit of deferrals is also an operational error and if corrected under EPCRS and the principle is to essentially to put the plan (participants) in the position it should have been in had the error not occurred, it seems the adjustment for earnings just based on 6621 may not do that.

Is there a disconnect between what the DOL allows and what the IRS requires? How are others calculating earnings on these late deposits?

I attended a conference hosted by the DOL last month in New York. The conference had a session on VFC but also had a session hosted by an IRS representative. I posed that exact question to the IRS rep and was told that the DOL earnings calculation method was acceptable to the IRS.

[Guest philc]

And I assume that if there is a correction under EPCRS the plan must use the adjustment for earnings methods (reasonable methods) specified under that program.

[Guest Madison]

The revised VFCP release on April 19, 2006 eliminated complicated requirements for the computation of actual plan earnings. Instead, the revised VFCP focuses on the IRC section 6621 rate in its Loss Earnings calculation. I still have the same question of is this an acceptable correction to use under EPCRS?

[Randy Watson]

Are you sure you have a qualification failure? In this case, you only have an operational failure if the amounts were not deposited in accordance with the plan document. Do the late deposits violate the terms of the plan?

[Guest Madison]

If you do not want to file with the VFCP and EPCRS is only for a qualification failure, where are people getting guidance on the correction method to use?