Twenty (20!) years after it last issued guidance, the DOL’s Employee Benefits Security Administration has finally released an updated Voluntary Fiduciary Correction Program (VFCP). VFCP is a program that permits retirement plan fiduciaries to correct certain fiduciary breaches, such as penalties that are imposed for late remittance of participant contributions, without being subject to civil enforcement penalties. Notable changes to VFCP include:
- A new Self-Correction Component (SCC) for delinquent contributions. Plan sponsors are encouraged to self-report and receive acknowledgement from the DOL that the program has been utilized.
- A reduction of the amount of documentation needed to demonstrate correction under SCC.
- A statement that waiting until year-end to identify late remittances, and remit at that time, is not considered prudent fiduciary oversight. This is a significant statement, as historically many plans wait until their annual audit to identify and correct late contributions.
To use SCC, the amount of the lost earnings owed to the plan cannot exceed $1000, including applicable excise taxes. Also, employers must remit the delinquent contributions to the plan within 180 calendar days from the date the amounts were withheld from pay.
An ongoing concern for plan sponsors is the requirement to notify plan participants of the late remittances if using VFCP to correct. This new guidance provides that if plan sponsors use SCC, they are not required to notify participants if they otherwise pay any applicable excise taxes. Since the excise taxes are often de minimis, the ability to obtain DOL acknowledgement for a correction through SCC may render the Voluntary Fiduciary Correction Program more appealing to plan sponsors than it has been in the past.
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