Practice Management
Editor's Note: This is the sixth installment in an occasional series concerning correcting plan loan failures.
Q. What interest rate should the plan use to correct a late deposit of elective deferrals or loan repayments?
A. The correction for a late deposit of deferrals or loan repayments is for the employer to deposit the deferrals or loan repayments, plus the greater of the lost earnings to the plan or restoration of the profits received by the employer for the use of the money. However, under the Voluntary Fiduciary Correction Program (VFCP), the employer may determine lost earnings by using the Internal Revenue Code 6621(a)(2) interest rate. The Department of Labor’s (DOL) has provided an online calculator to determine lost earnings under the Code Section 6621(a)(2) interest rate. The DOL’s position is that employers only should use the online calculator it files under VFCP. However, many practitioners who self-correct use the online calculator.
Editor’s Note: This content is taken from “Loans: Correcting Taxation, Qualification and Fiduciary Failures,” an April 15, 2020 ASPPA Webinar presented by Stephen W. Forbes J.D., LL.M. of Forbes Retirement Plan Consulting.
Opinions expressed are those of the author, and do not necessarily reflect the views of ASPPA or its members.
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