Updates to the DOL’s Voluntary Fiduciary Correction Program

For the first time since 2006, the Department of Labor’s (DOL) Voluntary Fiduciary Correction Program (VFCP), originally designed to encourage voluntary correction of certain fiduciary violations of eligible transactions and avoid potential DOL enforcement actions and penalties, has been updated. On January 14, 2025, the Employee Benefits Security Administration (EBSA) of the DOL announced several changes to the VFCP, most notably the addition of self-correction features for delinquent participant contributions and loan repayments, and inadvertent participant loan failures. Previously, relief from enforcement action was only available if the plan official submitted a full VFCP paper application to the DOL, often described as an administrative and costly burden.

Self-Correction for Delinquent Participant Contributions and Loan Repayments

The new self-correction component (SCC) for delinquent participant contributions and loan repayments, the most common violations corrected under the VFCP, is available to all eligible employer-sponsored retirement plans regardless of their size and allows for self-correction of delinquencies where the lost earnings on the delinquent amounts are $1,000 or less, excluding any excise taxes paid to the plan under Prohibited Transaction Exemption (PTE) 2002-51, provided that:

• An SCC notice is electronically filed with EBSA through its online VFCP web tool;
• The delinquent participant contributions or loan repayments are remitted within 180 days from the date of withholding or receipt;
• Any penalties, late fees, or other charges are paid by the employer or another plan official and not from contributions or loan repayments;
• Lost earnings are calculated using EBSA’s online calculator from the date of withholding or receipt;
• Self-correctors complete and retain the self-correction retention record checklist, which includes a penalty of perjury statement; and
• Neither the plan nor the plan official is “under investigation.”

Filers will receive an email acknowledgment of the SCC notice submission but will not receive a “no action” letter, which is only available in the case of a full VFCP application. There is no limit as to how often the SCC may be used; however, repeated use could result in an EBSA inquiry or investigation to identify why the untimely remittances are recurring. Additionally, plans using the VFCP must still report delinquent participant contributions on Form 5500 or Form 5500-SF, regardless of whether they use the SCC or full VFCP application component.

Self-Correction for Inadvertent Participant Loan Failures

The SCC for inadvertent participant loan failures covers loan errors that:

• Did not comply with the plan provisions regarding the amount, duration, or repayment schedule;
• Defaulted because repayments were not properly withheld from the participant’s wages;
• Failed to obtain spousal consent; and/or
• Exceeded the number of loans permitted under the plan.

If self-correcting these loan failures through the SCC component of the VFCP, they must first be corrected under the IRS Employee Plans Compliance Resolution System (EPCRS) self-correction program. VFCP self-correctors are then required to:

• Submit an SCC notice electronically with EBSA through its online VFCP web tool; and
• Complete and retain required documentation substantiating self-correction of the failure, including a penalty of perjury statement.

The SCC Record Retention Checklist is not required for this type of transaction. Similar to the SCC for delinquent participant contributions and loan repayments, self-correctors for participant loan failures will receive an email acknowledgment instead of a “no action” letter.

The effective date of the amended VFCP is March 17, 2025. Additional information can be found in the DOL Fact Sheet, which summarizes all provisions of the program.

Please contact us if you have questions about the information outlined above; our seasoned and experienced employee benefit plan professionals are here to help. You can also learn more on our Employee Benefit Plan services page.

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