Jump to content

DOL online calculator NOT sufficient?


SavingsRUS

Recommended Posts

Is the use of the DOL online calculator to determine the earnings to be paid when correcting late 401(k) deferrals, and the payment of the excise tax on that amount by filing Form 5330, sufficient to correct the error? :unsure:

Is anyone finding that the DOL is requiring a VFC application as well in order to rely on the use of the DOL online calculator?

Link to comment
Share on other sites

OK, here's the deal. The VFCP has no self correction options. The VFCP does say that lost earnings are calculated using the DOL online calculator. So if you are filing under VFCP you can definitely use the calculator. The VFCP provides no other method for calculating earnings. [edit: There is that "restoration of profits" piece to the on-line calculator, so for example if plan assets were used to buy a power-ball ticket and you hit the winning number, the plan gets the profits]

In previous iterations of VFCP, the loss was calculated as the greater of a) the return that would have been realized had that failure not occurred, and b) the on-line calculator (which is interest calced based on the IRS underpayment rate).

The interesting question is what happens if you are NOT filing under VFCP. I think in that situation the DOL could come in and request interest at the greater of the two rates mentioned above. But in practice, in my experience, the DOL has accepted the on-line calculator in all situations.

Austin Powers, CPA, QPA, ERPA

Link to comment
Share on other sites

That has happened. From a prior employer I know of a case where the plan self-corrected the late deposits using the DOL calculator rates, but with no VFCP filing. When the DOL audited, they would not allow that rate, saying you only get to use that if you file VFCP. They required new calculations to use the actual rates or the highest rate. The plan had to put in something like an extra $125 of missed earnings.

Yet I also know of several other instances where the DOL agent (different ones) accepted the use of the DOL rates even though no VFCP filing was done.

Link to comment
Share on other sites

This is a great thread to post a question that has been nagging me for quite some time. In a situation where you discover late deposits and convince the Sponsor to report them (both in a filing and on the 5500), when do you self-correct alone, self-correct with a 5330, file under VFCP or a combination?

ERPA, QPA, QKA

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
×
×
  • Create New...