Proposed Changes to the VFCP Would Make Self-Correction Easier
The U.S. Department of Labor's Employee Benefits Security Administration recently proposed an update to its Voluntary Fiduciary Correction Program that would allow employers and retirement plan officials to report self-correction of late deposits electronically. The proposed changes to the VFCP would make it easier and more cost-effective for plan officials to correct violations and for the department to improve compliance.
The self-correction component of the updated VFCP would cover a variety of late deposit situations, including late contributions or participant loan repayments sent to a retirement plan. Late deposits are currently the most common failure corrected through the VFCP. These proposed changes would enable employers to self-identify and correct failures without needing to submit an application for review and approval by the DOL.
Groups like the American Retirement Association have applauded the proposed changes to the VFCP. The ARA has long advocated for a self-correction component of the program as this would enable employers to correct violations more quickly and efficiently. It is hoped that these proposed changes will be approved, making self-correction easier and more cost-effective for employers.
Proposed Changes
The proposal includes more comprehensive guidance on the types of transactions that could be eligible for correction and a simplified administrative process. It would also amend Prohibited Transaction Exemption (PTE) 2002-51, which exempts certain VFCP transactions from Internal Revenue Code sanctions.
Compliance with the self-correction program would protect employers from civil monetary penalties and enforcement actions, though the DOL reserves the right to investigate if it believes the self-correction was not done properly.
Eligibility Criteria
For the self-correction component of the Voluntary Fiduciary Correction Program, self-correctors must meet all of the following criteria:
- Not being under investigation as defined in the VFCP.
- Remitting contributions or loan repayments within 180 days from the withholding or receipt date.
- Lost earnings not exceeding $1,000.
- Using the online calculator to determine lost earnings and the web tool to file the notice with the DOL.
- Completing and retaining a self-correction retention record checklist.
- Filing an electronic notice with the DOL.
Employers can still make corrections if a late deposit is not eligible, but it would have to be done through the traditional VFCP process.
This Just In ... Companies Are Helping Their Employees Buy Homes
New DOL Rule Would Have Retirement Plans Consider Environmental and Social Factors
How Employers Can Maintain Worker Well-Being with Leaner Budgets
Do Rewards Programs Really Help Employee Retention?
Proposed Changes to the VFCP Would Make Self-Correction Easier
The information presented and conclusions within are based upon our best judgment and analysis. It is not guaranteed information and does not necessarily reflect all available data. Web addresses are current at time of publication but subject to change. SmartsPro Marketing and The Insurance 411 do not engage in the solicitation, sale or management of securities or investments, nor does it make any recommendations on securities or investments. This material may not be quoted or reproduced in any form without publisher's permission. All rights reserved. ©2023 Smarts Publishing https://smartspublishing.com/ Tel. 877-762-7877.