DOL Announces Voluntary Fiduciary Correction Program Expansion Proposal Reopens Comment Period; Comments Due April 17

The U.S. Department of Labor (DOL) Employee Benefits Security Administration (EBSA) reopened the comment period for proposed amendments to the Voluntary Fiduciary Correction (VFC) Program that resulted from the SECURE Act 2.0, part of the Consolidated Appropriations Act, 2023, signed into law on December 29, 2022.

The comment period is being reopened to allow commenters to address any issues raised by the new statutory provision, including:

• What revisions, if any, should be made to the VFC Program to reflect the treatment of corrections of loans to participants as described in SECURE 2.0 section 305(b). Specifically, how should the VFC Program be modified in the future to implement the new provision in SECURE 2.0 section 305(b)(2)? For example, should Section 7.3 be amended to include a specific paragraph treating items self-corrected under EPCRS as meeting the requirements of the VFC Program?

• In addition, should the VFC Program impose additional reporting or other procedural requirements for these specific corrections, and why?

• Are changes needed to PTE 2002-51 to implement SECURE 2.0 section 305(b)(2)? The Department is interested in comments that address these and related issues. The Department also is interested more generally in any other aspects of section 305 as it affects EPCRS that should be taken into account by the Department in making further revisions to the VFC Program and PTE 2002-51.
  
  

Comments are due April 17, 2023.

News release

(updated February 14, 2023)

The U.S. Department of Labor (DOL) Employee Benefits Security Administration (EBSA) has issued a proposal to amend and restate its voluntary retirement plan correction program to cover a broader range of transactions and streamline the correction process. Proposed updates include a self-correction component for employers who fail to send employee salary withholding contributions or participant loan repayments to retirement plans in a timely manner. 

The planned changes to the Voluntary Fiduciary Correction Program are intended to make it easier and more cost effective for plan officials to correct violations, and for the department to improve compliance. The program allows plan officials to avoid potential civil enforcement actions and civil penalties under the Employee Retirement Income Security Act (ERISA) if they voluntarily correct eligible transactions in a manner that meets the program’s requirements.
EBSA’s proposed changes will do the following:

• Clarify some existing transactions that are eligible for correction under the program.
• Expand the scope of other transactions currently eligible for correction and simplify administrative or procedural requirements under the program.
• Amend the associated prohibited transaction class exemption, known as PTE 2002-51. 
• Notice of Proposed Amendment to PTE 2002-51  

Most significant among the proposed changes is the addition of the self-correction component. This feature will enable employers and other plan officials to notify EBSA electronically that they have self-corrected certain failures to send participant contributions and loan repayments to pension plans on time. The proposed self-correction component can only be used if the following conditions are met:

• Participant contributions or loan repayments to the plan must be remitted no more than 180 calendar days from the date of withholding or receipt.
• Lost earnings must not exceed $1,000 calculated from date of withholding or receipt.
• The plan or self-corrector must not be under investigation as defined in the program.
• Self-correctors must use the program’s online calculator to calculate lost earnings and an online web tool to complete and file the self-correction component notice. Self-correctors must also complete and retain the self-correction retention record checklist.
  

Correction of these transactions under the current Voluntary Fiduciary Correction Program requires plan officials to submit an application to EBSA for review and approval.

Comments are due January 20, 2023.

News release

(posted November 18, 2022)