Seyfarth Synopsis: The DOL updated its voluntary fiduciary correction program (“VFCP”) which was introduced over 20 years ago to allow plan sponsors to corrected enumerated fiduciary breaches. The amended VFCP now allows for self-correction of the failure to timely remit contributions and loan repayments withheld from participants’ salary to the plan.
The prior VFCP required the administrator to make a formal submission to the DOL, along with full correction of the delinquency (i.e., remittance of all contributions and loan repayments withheld from participants’ salary, adjusted for “missed” earnings, in order to receive a “no action letter” under which the DOL would agree not to assert a fiduciary breach. Additionally, if other requirements are met, the DOL would not assert a prohibited transaction (PT) and provided for an exemption from the payment of an excise tax on such PT.
Recognizing that making the submission to the VFCP was a time consuming and expensive proposition for sponsors, the updated VFCP now provides for a “self-correction” approach that foregoes the need to submit a formal application to the DOL. While the plan must provide notice to the DOL that it is using the self-correction approach, the DOL will provide an acknowledgement of the self-correction but, of course, does not result in the DOL issuing a no action letter.
The DOL also has expanded the self-correction approach under the VFCP to cover certain inadvertent eligible loan failures under the expanded IRS correction procedures mandated by SECURE 2.0. To use the VFCP to self-correct inadvertent loan failures, once again, notice must be given to the DOL under the new procedure.
For more information on the when the self-correction approach is available and the steps that must be taken, please see our Legal Update here.
Of course, feel free to reach out to your Seyfarth employee benefits lawyer with any questions.