When does the IRS permit the use of the DOL online calculator for corrections under EPCRS?
Rev. 09/03/09; E-mail Alert 2009-14

The DOL's online calculator is extremely handy for determining the earnings due on a late deposit of deferrals and for other DOL corrections. The calculator was created by the DOL for use in correcting violations under the Voluntary Fiduciary Correction Program (VFCP). It was hoped that the IRS would permit the DOL calculator to be used to calculate earnings on corrections under the IRS' Employee Plans Compliance Resolution System (EPCRS). In the most recent EPCRS issued as Rev. Proc. 2008-50, the IRS addressed this question. Generally, the IRS continues to require the use of its EPCRS defined earnings calculations. However, the IRS does permit the DOL calculator for EPCRS corrections if either the difference in the two calculations is insignificant or if it is impossible to make a precise calculation and it is not feasible to make a reasonable estimate. To be as clear and precise as possible, below we present in quotes, from Revenue Procedure 2008-50 (page 28-29), the IRS EPCRS rule on when the DOL online calculator may be used for an EPCRS calculation:

“(a) Reasonable estimates. If either (i) it is possible to make a precise calculation but the probable difference between the approximate and the precise restoration of a participant's benefits is insignificant and the administrative cost of determining precise restoration would significantly exceed the probable difference or (ii) it is not possible to make a precise calculation (for example, where it is impossible to provide plan data), reasonable estimates may be used in calculating appropriate correction. If it is not feasible to make a reasonable estimate of what the actual investment results would have been, a reasonable interest rate may be used. For this purpose, the interest rate used by the Department of Labor’s Voluntary Fiduciary Correction Program Online Calculator (“VFCP Online Calculator”) is deemed to be a reasonable interest rate. The VFCP Online Calculator can be found on the web at http://www.dol.gov/ebsa/calculator.”

Bill Grossman, ERPA, QPA

Keep in mind that a variety of VFCP transactions may use the online calculator:

INDEX OF ELIGIBLE VFCP TRANSACTIONS THAT MAY USE THE ONLINE CALCULATOR

Delinquent Remittance Of Participant Funds
> Delinquent Participant Contributions and Participant Loan Repayments to Pension Plans
> Delinquent Participant Contributions to Insured Welfare Plans (No Lost Earnings)
> Delinquent Participant Contributions to Welfare Plan Trusts

Loans
> Loan at Fair Market Interest Rate to a Party in Interest with Respect to the Plan (No Lost Earnings)
> Loan at Below-Market Interest Rate to a Party in Interest with Respect to the Plan
> Loan at Below-Market Interest Rate to a Person Who is Not a Party in Interest with Respect to the Plan
> Loan at Below-Market Interest Rate Solely Due to a Delay in Perfecting the Plan’s Security Interest

Purchases, Sales, And Exchanges
> Purchase of an Asset (Including Real Property) by a Plan from a Party in Interest
> Sale of an Asset (Including Real Property) by a Plan to a Party in Interest
> Sale and Leaseback of Real Property to Employer Purchase of an Asset (Including Real Property) by a Plan from a Person Who is Not a Party in Interest with Respect to the Plan at a Price More Than Fair Market Value
> Sale of an Asset (Including Real Property) by a Plan to a Person Who is Not a Party in Interest with Respect to the Plan at a Price Less Than Fair Market Value
> Holding of an Illiquid Asset Previously Purchased by a Plan

Benefits
> Payment of Benefits Without Properly Valuing Plan Assets on Which Payment is Based

Plan Expenses
> Duplicative, Excessive, or Unnecessary Compensation Paid by a Plan
> Expenses Improperly Paid by a Plan
> Payment of Dual Compensation to a Plan Fiduciary

For examples and more details, click here.

For much more on EPCRS click here for information on our Retirement Plan Insights Class.