The U.S. Department of Labor’s (DOL) Employee Benefits Security Administration (EBSA) has issued proposed updates to its Voluntary Fiduciary Correction Program (VFCP). Notice of the proposed updates allows 60 days for public comments, expiring on January 20, 2023. The existing features of the VFCP will remain in place until EBSA publishes final revisions to the VFCP in the Federal Register.
EBSA’s VFCP originated in 2002 and underwent significant simplification and updates in 2006. The purpose of the VFCP is to encourage employer compliance with the Employee Retirement Security Income Act (ERISA) by voluntarily correcting inadvertent legal violations. The VFCP covers various transactions, explains how employers can take advantage of the voluntary correction mechanism, and sets forth acceptable methods for correcting violations. Voluntarily correcting covered ERISA violations can help employers and employee benefit plan sponsors avoid civil enforcement actions and penalties for non-compliance.
The updates will make the following changes to the VFCP:
- Clarify that some existing transactions are eligible under the VFCP;
- Expand the scope of some other transactions currently eligible for correction under the VFCP;
- Simply procedural and administrative steps under the VFCP;
- Amend the associated prohibited transaction class exemption (PTE 2002-51) and
- Create a self-correction reporting component for VFCP.
The major update to the VFCP is an electronic self-correction component for employers who fail to timely submit employee withholding contributions or loan repayments to retirement plans. This mechanism will allow employers and other plan administrators to notify EBSA of their self-correction of certain ERISA violations. More specifically, they can electronically report that they have corrected instances in which they have failed to submit participant contributions and loan repayments to retirement plans on time.
Plans can use the self-correction component only if they meet certain criteria:
- Late remittances of contributions or repayments to the plan must occur no more than 180 calendar days from the date that they were withheld or received;
- Lost earnings calculated from the date of withholding or receipt must not exceed $1,000; and
- Neither the plan nor the self-correcting person or entity can be under investigation at the time of the self-correction.
Additionally, those using the self-correction component must use the provided online calculator to tabulate lost earnings and the online web tool to complete and file the self-correction notice. Participants must complete and keep the self-correction retention record checklist for their records.
Currently, voluntary correction of transactions under the VFCP requires participants to manually complete and submit an application to EBSA for review and approval. As a result, the electronic self-correction reporting component should provide a more efficient means of reporting.
HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 470-571-1007.
Hall Benefits Law, LLC
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