Lost earnings are the investment gains your 401(k) contributions would have earned if they had been deposited into your account on time. When your contributions are delayed, those funds miss out on potential market growth. If a delay happens, you may get a lost earnings adjustment to make up for that missed growth. Lost earnings are calculated using formulas set by the Internal Revenue Service (IRS) or the Department of Labor (DOL), depending on the reason for the delay. This article covers the common reasons for lost earnings adjustments and how to view them in your account.
Here are the main reasons you may get a lost earnings adjustment in your account:
Late deposits of employee contributions: Your personal contributions (deferrals and loan payments) are deducted from your paycheck. They should be deposited into your 401(k) account as soon as your employer can reasonably separate them from their business assets. If these deferrals or loan repayments are withheld from your pay but not deposited on time, it counts as a late deposit. The IRS and DOL view this as your employer temporarily holding your funds for their own use
Missed deferrals: If your employer does not withhold deferrals from your pay when they should have, this is called a “missed deferral opportunity.” In this case, your account may get a corrective contribution called a Qualified Non-elective Contribution (QNEC). A QNEC is an employer contribution that is 100% vested. Lost earnings are then calculated on this QNEC using the original payroll date when the deferral should have happened
Late employer contributions: Employer contributions also have specific deposit deadlines, which can be outlined in your plan document. If these contributions are deposited after their deadline, lost earnings apply
Third-party errors: In rare cases, a third-party error — for example, by Gusto Retirement or a payroll provider — may cause some assets to be out of the market for a long time. In certain situations, that third party will generally cover any lost earnings. This is decided case by case after we investigate the cause of the delay
If lost earnings apply to your account, we will generally notify you by email with details about the adjustment.
Once applied, you can view this activity in your Gusto Retirement dashboard.
Choose the path that matches how you signed in.
Sign in to Gusto and go to Benefits. Under Savings, find 401(k) and select View, then select Manage 401(k).
Transaction history is displayed on the Overview page. Look for Correction to find the adjustment.
Sign in directly at the Gusto Retirement sign-in page.
Go to Transactions in the main menu and look for Correction.
The adjustment will also appear on your applicable statement. You can find statements in the Documents tab.