Returning deferrals--how to calc earnings?

[BG5150]

We have a plan that withheld 401(k) deferrals from bonuses, which are excluded in the plan document. So we need to return the deferrals to the participants.

For corrective contributions, that is, when we need to GIVE the participatn something, we've been using the DOL calculator for earnings out of convenience.

Can this same method be used when calc'ing earnings on funds LEAVING the plan? If the participant experienced a loss in real life, then using the DOL figures will jsut serve to exacerbate the losses.

So how do you figure out the earnings for funds leaving the plan in practice?

(My software cannot accomplish this)

[John Feldt ERPA CPC QPA]

I think it can, if you have actual rates, use actual earnings rates. Otherwise look at Revenue Procedure 2013-12, Section 6.02(5)(a) where I think it says in cases where using an actual rate of return is either not available or the cost to determine the actual rate of return would exceed the difference - those situations allow you to use the DOL VFCP calculator rates.

[BG5150]

So, people who had a loss are just SOL?

[John Feldt ERPA CPC QPA]

No, not if you apply the actual earnings on their accounts. But yes, if you use the DOL rate. How much actual earnings difference is there?

[BG5150]

We often have plans with a couple hundred over-matches, or Safe Harbor contribs more than 3%. In one case, we have a plan that allowed participants to defer from bonuses when they are explicitly excluded from the plan.

We are trying to get procedures in place to most efficiently calculate the earnings for those transactions that have money leaving the plan. (Or at least, the participants' accounts)