allocating lost earnings on distribution overpayment

A large profit sharing plan with pooled account overpaid a distribution in 2018. The participant reimbursed the plan for the appropriate amount (in March 2019), the year-end reports/ participant statements correctly reflect that, and the  5500 shows a receivable  for that amount that was reimbursed subsequent to year end. Lost earnings were paid by plan sponsor to the plan in April 2019, but those lost earnings were not accounted for by the TPA for 2018.

The TPA for the plan agrees that those lost earnings will need to be accrued on the 5500, but asked whether or not they have to re-do the year-end work – participant statements, nondiscrimination testing, etc – for the accrued lost earnings that should have been allocated to participant accounts.

Is it an acceptable practice to allocate the lost earnings in a subsequent year? 

Thanks!

Back when I did balance forward PSPs what we would have tried to get everyone to agree to would be the following if the amount wasn't very material.

We would allocate it on our systems now using the correct basis that OUGHT to have been used in 2018.  So that way it was allocated correctly and in people's accounts correctly if a distribution is paid in 2019.  But we would show it as an adjustment (if real small maybe just net it with the 2019 earnings) on the 2019 statements.  That way you don't go through the trouble and expense of new statements but it was done correctly.  

That is one of the nice things about balance forward work.  You can still go back and figure out how it ought to have been allocated in 2018 still.  But it need be not show it on statements until 2019.   But I would set it up so if someone gets paid in 2019 they still get their share of the earnings.  That way you can show anyone who questions the fix everyone was made whole correctly you just didn't go through the expense of new statements.

I guess if you have already paid a bunch of distributions and this idea is going to cause large number of small checks people will have to decide if the small checks are worth it or not. 

I don't see how this error effects testing so I don't see why any of that would need to be redone. 

I would make allocating it in 2019 on the 2019 basis my 2nd choice always.  With balance forward work you ought to be able to do the allocation on the 2018 basis but show it in 2019. 

Thanks, ESOP Guy - most helpful!