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.