EBSA letter re late deposits

[gregburst]

In 2010, a plan sponsor missed a regular deposit of $1,700. This oversight was discovered nine months later (before end of plan year). At that point, it was immediately deposited; and lost earnings of $50 were calculated and deposited.

Sponsor recently received a letter from EBSA stating that the situation needs to be corrected. VFCP was recommended. Is VFCP required in this case?

[Bill Presson]

In 2010, a plan sponsor missed a regular deposit of $1,700. This oversight was discovered nine months later (before end of plan year). At that point, it was immediately deposited; and lost earnings of $50 were calculated and deposited.

Sponsor recently received a letter from EBSA stating that the situation needs to be corrected. VFCP was recommended. Is VFCP required in this case?

That's become a standard letter sent by EBSA. It is a suggestion, but not a requirement.

[John Feldt ERPA CPC QPA]

The time and effort to file under VFCP will far exceed the $50.

When you say you calculated the lost earnings - did you calculate the lost earnings based on the plan's rate (or best returning fund)? Or, did you use the DOL interest rates and their calculator?

If you used the DOL rate, then you've satisfied the IRS, strangely enough. But unless you file the VFC thing with the DOL, you aren't technically eligible to use the DOL interest rate.

From DOL investigations we've seen where VFCP was not filed, there have been 2 results, differing only because of the difference in the auditor (as far as we could tell):

Investigation #1) Agent: You are not eligible to use the DOL rate, you must recalculate using the non-DOL interest rate (plan rate). Plan spends several hours of time to calculate and puts in an extra $67 into the plan. Case closed. Cost benefit analysis? Irrelevant.

Investigation #2) Agent: You used the DOL interest rate, we're alright with that. Case closed.