diff --git a/megatron/core/distributed/grad_buffer.py b/megatron/core/distributed/grad_buffer.py
index 949bc9468c..0b41d3a2bc 100644
--- a/megatron/core/distributed/grad_buffer.py
+++ b/megatron/core/distributed/grad_buffer.py
@@ -210,8 +210,10 @@ def __init__(
         self.param_to_bucket = {}  # Param -> bucket mapping.
         self.param_index_map = {}  # Param -> location in buffer mapping (used in dist. optimizer).
 
-        def _pad_if_needed(data_index: int):
-            """Pads data indices if using distributed optimizer (to ensure uniform sharding)."""
+        def _pad_if_needed(data_index: int) -> int:
+            """
+            Pads data indices if using distributed optimizer (to ensure uniform sharding).
+            """
             if use_distributed_optimizer:
                 return (
                     int(math.ceil(data_index / self.data_parallel_world_size))
@@ -229,14 +231,22 @@ def _pad_if_needed(data_index: int):
         per_bucket_numel_unpadded = []
         bucket_id = 0
 
-        def _create_new_bucket(data_end_index: int):
+        def _create_new_bucket(data_end_index: int) -> int:
+            """
+            Create the bucket_id'th bucket with collected bucket_params, starting at
+            bucket_data_start_index.
+            """
             nonlocal bucket_data_start_index, bucket_params, bucket_id
             per_bucket_numel_unpadded.append(data_end_index - bucket_data_start_index)
             data_end_index = _pad_if_needed(data_end_index)
+            # Update bucket metadata.
             self.bucket_indices.append((bucket_data_start_index, data_end_index))
             bucket_data_start_index = data_end_index
+            # Re-set bucket_params and increment bucket_id for next bucket.
             bucket_params = set()
             bucket_id += 1
+            # Return the potentially padded data_end_index.
+            return data_end_index
 
         for param in params[::-1]:
             # Iterate through parameters in reverse order to roughly follow backprop order,
@@ -247,17 +257,22 @@ def _create_new_bucket(data_end_index: int):
             data_end_index = data_start_index + this_numel
 
             def _does_param_require_new_bucket(param):
-                # Split shared embedding parameters into separate bucket if using distributed
-                # optimizer that makes use of reduce-scatters instead of all-reduces.
-                # This ensures that the first and last pipeline stage partition optimizer state
-                # for the shared embedding parameters the same way across DP replicas, allowing
-                # the DP reduce-scatter to be before the embedding all-reduce.
+                """
+                Split shared embedding parameters into separate bucket if using distributed
+                optimizer that makes use of reduce-scatters instead of all-reduces.
+                This ensures that the first and last pipeline stage partition optimizer state
+                for the shared embedding parameters the same way across DP replicas, allowing
+                the DP reduce-scatter to be before the embedding all-reduce.
+                """
                 return getattr(param, "shared_embedding", False) and self.use_distributed_optimizer
 
             # Create bucket with already collected parameters if current param needs its own bucket.
             if _does_param_require_new_bucket(param) and len(bucket_params) > 0:
                 # We are creating a bucket for the already accumulated parameters, whose params
                 # end at the current data_start_index.
+                if use_distributed_optimizer:
+                    # data_start_index should already be padded.
+                    assert data_start_index % self.data_parallel_world_size == 0
                 _create_new_bucket(data_start_index)
 
             self.param_index_map[param] = (
@@ -273,12 +288,12 @@ def _does_param_require_new_bucket(param):
                 bucket_size is not None
                 and (data_end_index - bucket_data_start_index) >= bucket_size
             ) or _does_param_require_new_bucket(param):
-                _create_new_bucket(data_end_index)
+                data_end_index = _create_new_bucket(data_end_index)
             data_start_index = data_end_index
 
         # Add remaining params to a new bucket.
         if len(bucket_params) > 0:
-            _create_new_bucket(data_end_index)
+            data_end_index = _create_new_bucket(data_end_index)
 
         # Next, create underlying storage for buffer (with numel elements that includes
         # padding as necessary).