Can I use the DOL calculator for that?! What plan sponsors need to know.

Even the most diligent plan sponsors occasionally encounter retirement plan issues that require correction. When those corrections involve lost earnings, one of the first questions that often comes up is, “Can we use the DOL calculator?” In most cases, the answer is no. This may cause you to ask, “What is the DOL calculator actually for—and when is it appropriate to use it?” Here’s how the DOL calculator actually fits into corrections…  

What Is the DOL Calculator?

The Department of Labor’s online earnings calculator is a tool designed to help calculate lost earnings in very specific situations. It asks for a variety of data points to include the “loss date” (date the failure began), principal amounts involved, and the date the money was restored to the plan, which may be different from the final payment date.  Based on that information, the calculator determines the amount of earnings that must be restored to the plan excluding the principal.

From a plan administration standpoint, the calculator can be extremely helpful when its use is appropriate as it takes some of the heavy lifting out of finding historical earnings. Perhaps unfortunately, instances when the DOL calculator can be correctly used are few and far between.

When Can the DOL Calculator Be Used?

The two key limitations to correctly using the DOL calculator are that (1) the transaction must fall within a narrow group of transactions the DOL classifies an “eligible VFCP transactions” and (2) only when the correction that narrowly defined transaction type is submitted through the DOL’s Voluntary Fiduciary Correction Program (VFCP).  If a correction does not meet both of those criteria—eligible transaction and VFCP submission—the DOL calculator should not be used. The most common example of the DOL calculator’s appropriate use is late deposits of participant deferrals that are corrected through a formal VFCP filing.

When the DOL Calculator Is Not Appropriate

As you might now imagine, the list of scenarios where the DOL calculator cannot be used is significantly longer than when it can. Examples include DOL-covered failures corrected outside of a VFCP application and the multitude of failures correctible under the IRS’s Employee Plans Compliance Resolution System (EPCRS). The appropriate earnings methodology depends on which regulatory framework applies.

DOL‑Based Corrections Without VFCP

For DOL‑related failures such as late deposits or loan repayment issues corrected outside VFCP, or certain investment mapping errors, earnings options include the greater of:

• Actual earnings for each affected participant

• The plan’s best‑performing investment fund

• The employer’s earnings on the use of the withheld funds

IRS‑Based Corrections

For failures corrected under IRS rules, acceptable earnings methods include:

• Actual investment earnings

• The plan’s average (weighted average) rate of return (Only available when the participant does not have an investment election on file)

• The plan’s best‑performing fund, if the majority of affected participants are non‑highly compensated employees (NHCEs)

• The plan’s default investment option (Available only for plans with automatic contribution arrangements and where there was no participant election. Note, losses may not be applied when using this method)

The Bottom Line

While the DOL calculator can be a useful tool, its application is far more limited than one might think, and as a plan sponsor you want to be sure to use the correct earnings methodology for the given scenario.

If you are unsure which approach applies—or want to confirm that a correction method is reasonable and compliant—it is worth addressing those questions before finalizing the correction.

Still have questions?Give us a call or send an email at info@OakridgeRetirementBenefitsLaw.com or 317‑207‑2350.