The U.S. Department of Labor has announced that its Employee Benefits Security Administration has proposed some big changes to its Voluntary Fiduciary Correction Program—including a provision long-promoted by the American Retirement Association that should help plan sponsors and providers.
According to a press release, the “most significant among the proposed changes” is 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. 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.
That said, 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 (in a press call, senior officials at the DOL said they anticipated comments on this level).
- 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.
“The Employee Benefits Security Administration is seeking public comments on planned changes to the Voluntary Fiduciary Correction Program that will make it easier and more cost effective for plan officials to correct violations, and for the department to improve compliance,” explained Assistant Secretary for Employee Benefits Security Lisa M. Gomez.
Beyond that self-correction enhancement, 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.
“The ARA has been advocating for a self-correction component to the VFC program for well over 10 years,” noted Kelsey Mayo, Director of Regulatory Affairs, American Retirement Association & Partner, Poyner Spruill LLP. “This is welcome news for plan sponsors and plan providers, and we look forward to reviewing and commenting on the proposal in the weeks ahead.”
The proposed updates are displayed at the Federal Register today and will be published on Nov. 21, 2022.
The Voluntary Fiduciary Correction Program and prohibited transaction exemption notices include a 60-day period for public comments and instructions on how to submit comments. The existing program and exemption remain available to the public until the Federal Register publishes final revisions.