Insights
The DOL Announces Updates to its Voluntary Fiduciary Compliance Program (VFCP)
On January 15, 2025, the U.S. Department of Labor (DOL) published major updates to its Voluntary Fiduciary Compliance Program (VFCP). In general, VFCP allows plan sponsors to avoid potential DOL civil enforcement actions and civil penalties by voluntarily correcting certain eligible fiduciary violations under the Employee Retirement Income Security Act (ERISA). Among other changes, the new rules, effective March 17, 2025, introduce a self-correction tool for the more common types of violations: delinquent participant contributions and loan repayments, and certain eligible inadvertent participant loan failures.
Self-Correction for Delinquent Participant Contributions and Loan Repayments
A major feature of the 2025 VFCP update is the introduction of a self-correction component (SCC) for addressing delinquent transmittal of participant contributions and loan repayments.
Previously, plan sponsors had to undergo a formal application process to correct these issues that was often lengthy and expensive. Now, under the new rules, employers can self-correct these violations without filing a formal request, provided certain conditions are met:
- The total lost earnings on the delinquent contributions or loan repayments must be less than or equal to $1,000.
- The delinquent contributions or loan repayments must be remitted to the plan within 180 calendar days from the date the funds were withheld or received by the employer.
Self-Correction for Eligible Participant Loan Failures
Additionally, the new rules allow plan sponsors to self-correct certain participant loan failures under VFCP, provided these failures are eligible for self-correction under the Internal Revenue Service’s Employee Plans Compliance Resolution System (EPCRS), as described in Rev. Proc. 2021-30 or successor guidance. Self-correction is available for eligible participant loan failures even if the plan or plan sponsor is under investigation.
Procedure for Self-Correction
To use the self-correction option, plan sponsors must submit an electronic notice through VFCP’s online web tool including details about the plan, the correction amount, and the participants affected. Sponsors must also complete a penalty of perjury statement. After submission, the DOL will acknowledge the correction via email. Unlike formal VFCP applications, which result in a “no-action” letter, self-corrections do not receive this letter.
The SCC is available for all types of plans, regardless of size, and there is no limit to how often a plan sponsor may use the SCC.
Amendment to Prohibited Transaction Exemption 2002-51
Another key update is a related amendment to the Prohibited Transaction Exemption (PTE) 2002-51, extending excise tax relief to self-corrections of delinquent participant contributions and loan repayments, and eliminating the limitation that applicants cannot have received excise tax relief under VFCP and PTE 2002-51 for a “similar type of transaction” in the past three years.
If you have any questions, please contact Jim Hoch (jhoch@wyrick.com), Clay Williams (cwilliams@wyrick.com), or Sarah Couillard (scouillard@wyrick.com) of our Employee Benefits & Executive Compensation group or your Wyrick Robbins contact.
NOTICE: This Alert provides merely an overview and summary information and is not written advice directed at the particular facts and circumstances of any person or company. Please note that not all potential details and nuances regarding these requirements and changes to law have been addressed, and this Alert does not involve analysis of specific facts concerning any specific company or reach any conclusion regarding tax or employee benefits issues for any specific individual or company.