Calculating lost earnings that involve Self Directed Accounts

[TPAVP]

A plan is currently under investigation. The DOL auditor found late deposits and wants to use the greater of: the VFCP Online Calculator (IRC 6621 (a)(2) and ( c)(1) rates) or actual earnings for the late deposits. During the onsite review the investigator determined that the Employer could have remitted contributions within 3 business days after being deducted but used the 7 day safe harbor for small plans. We have already calculated the lost earnings using the online calculator. The problem is:

1) The late deposits range from 1 to 275 business days late covering 3 years of payrolls

2) The participants are in multiple self directed accounts

My question is: How would one go about calculating lost earnings for payperiods over a 3 year period in self directed accounts for multiple participants involving potentially hundreds and hundreds of fund transactions over this timeframe???

[QDROphile]

Maybe you can get the investment provider to use the same approach as applied to QDROs. Still a lot of work for data entry, even under the best of circumstance.

[ESOP Guy]

As a former IRS agent allow me to make this suggestion. Have you tried talking to the auditor about the situation and the practical issues you face? You might find they are open to some simplifing assumptions- like you compute each of the account's ROI by quarter or year and apply that rate to all the late deposits for that period. Most auditors are still people and are mostly interested in being fair to the participant but understand how to be reasonable about it.

[TPAVP]

We have not spoken with the auditor directly as we were notified of the audit after the fact and have only been forwarded correspondence. This is my first experience in which the auditor has not accepted the online calculator and moved on. However, It may have something to do with the fact that he found over $180,000 in late contributions over a 3 year period.