| FAQ 746: ADP--How does ASC calculate earnings on the ADP correction when "Use Existing Earnings" is selected? |
Can you tell us how ASC calculates earnings on the ADP correction when we check the box marked "Use Existing Earnings (ADP)" before running the test.
Here is a sample of an earnings calculation.
[(6124.88*3497.65)/(39880.92-3497.65)] = 588.81 (Includes money from the entire fund separated by source.) This calculation does not include gap interest as this option must not have been selected.
Interest Calculation Date - Enter the date through which the system should calculate attributable earnings. For example, for a calendar year end plan, "12/31/xxxx" would be entered if no gap period earnings were to be calculated. The formula used to calculate the earnings is as follows:
Total Excess Contribution Interest = Plan Year Interest, where Plan Year Interest = [(Excess Contribution*Plan Year Interest) / (Ending Balance - Plan Year Interest)]
(The denominator in the above formula will also have withdrawals added back, if you did not select to "Include Withdraw in Interest Calculation" in the set up).
Gap Period Interest = Plan Year Interest*10%*Number of Months in Gap Period
(This calculation is done separately by source).
TIP: You must have accurate account activity in the HCE's fund and source Account Values screens in order for these calculations to be correct.