"Amount Involved" in late contributions for 5330

[BG5150]

What is the amount involved for late contributions for the 5330?

I would usually use the interest (and the interest on the interest) as provided by the DOL calculator as the amount involved.

However, someone here uses a spreadsheet with the gross amount of the late contribution and a loan factor and interest rate.

Obviously, the latter method is more complex.

Is there anything out there that tells us how to (easily) calculate the amount involved?

[jpod]

I am almost 100% sure there is an IRS Rev. Rul. that says you can use the earnings component derived from the DOL calculator.

[RatherBeGolfing]

It is one of those "it depends" answers... In order to use the DOL calculator, you also have to file under VFCP. Otherwise, your lost earnings should be the 1) actual return participant would have earned, or 2) highest rate of return during the period, allocated to all affected participants.

Basically, if you use the VFCP calculator and and dont file under VFCP, DOL can come in and say that your correction was insufficient. I believe it is still OK for IRS purposes though.

There was a really good article in the Journal of Pension Benefits a few years back that detailed the different steps per the regs.

(EDIT: it was the October 2012 issue. "How Much Goes Into Correcting Late Deposits?" by Frank Castrofilippo)

The calculator is the easiest step, you just have to go the extra mile with VFCP.

[John Feldt ERPA CPC QPA]

See Rev. Rul. 2006-38. It looks to me that the 15% excise tax is determined by using the reasonable interest rate on the date of the failure and the reasonable interest rate in effect as of the first day of the plan year for each year thereafter, but it's base on simple interest, not the form of compound interest that the DOL calculator uses.

This of course is not very practical to actually compute it this way, so I would think that probably 99.999% of all Form 5330 applications simply use the missed earnings amounts that were calculated for the actual correction, using those amounts and multiplying by the 15% excise tax rate for each year until fully corrected.

[BG5150]

There was a really good article in the Journal of Pension Benefits a few years back that detailed the different steps per the regs.

(EDIT: it was the October 2012 issue. "How Much Goes Into Correcting Late Deposits?" by Frank Castrofilippo)

The calculator is the easiest step, you just have to go the extra mile with VFCP.

Can you share that article with me?