Who pays the interest?

[Guest vwal]

Assume a sponsor of a defined benefit plan has underpaid certain participants due to an operational failure. The plan sponsor opts to correct the mistake under the SCP or VCP by making payments to affected participants that include the amount of underpayment plus interest. Does the interest payment come from plan assets, or from the employer?

Thanks for any ideas.

[J. Bringhurst]

Does the plan provide that forfeitures can be used to help pay for plan corrections?

[Guest vwal]

The plan provides that forfeitures will be applied to reduce the cost of the plan to the company.

[Just Me]

A defined benefit plan with forfeitures???

[david rigby]

Ever heard of vesting?

[Just Me]

Vesting...of course! But exactly *which* assets belong to a particular participant in a defined benefit plan that somehow become forfeitures that can be used to offset future employer contributions? If the assets are allocated to participant accounts, that's a defined contribution plan.

To answer the original post, the employer should pay the participants the amount they are due from the plan determined as of the corrective payment date, which will include "interest." This should come from plan assets, not the company, and be reported on Form 1099-R.