What is the fix for when it is discovered that since plan inception, the 2 owners/HCEs used FBO accounts to direct their plan assets, but kept all NHCE dollars in a trustee-directed investment? Should we determine the historical rate of return for the 2 NHCEs, compare that to the return on the NHCE investments, and fund the difference?

Thanks

This may be way too late a response to you.

This is a prime candidate for an anonymous VCP filing, whereupon you decide how you want to fix the problem, make the proposal to the IRS and see if they buy it.

Sounds to me like a determination of the earnings that were made on the FOB accounts could be applied to the accounts of the other participants with the Employer funding the difference for the non-FOB participants might be one good way to "make them whole."

This also smells to me like a fiduciary breach, but it's late Friday afternoon and I'm braindead, but you might also want to think about that as well.