Earnings Allocation

[Guest boxerengine]

Would anyone tell me how to allocate investment earnings to a participants separate brokerage account, so a participants 401k) money source receives higher portion of investment earnings? The DC Plan has both employer and salary deferral money sources.

[cpc0506]

First, you need to review the provisions of the Document. Are earnings allocated on a balance forward accounting. If so, there would be no extra earnings due to deposits during the year.

If there is no language for allocating earnings, you can allocate earnings based on how often salary deferral is deposited to the plan. Most software companies provide a spreadsheet of allocation percentages. I recall that if the payroll is weekly, the allocation weighting is something close to 45.33%. Check with your software provider.

[Bird]

Right, it depends on the document provisions. Often for non-daily valued plans, contributions such as 401(k) deferrals that are deposited throughout the year get credit for half of the total annual deposits in the determination of basis. (So if the beginning balance was $100K, and contributions were $16K, the basis for that source would be $108K.) That should be something you can set in your admin software.