DOL Proposes Fiduciary Self-Correction Option for Late Deposits

The DOL has proposed updates to its Voluntary Fiduciary Correction Program (VFCP), which hasn’t been updated since 2006. The VFCP encourages plan sponsors to correct common violations under ERISA and restore losses to plan participants before becoming the subject of an enforcement action. Proposed changes would expand the transactions eligible to be corrected under the program and make it easier and more cost effective for plan fiduciaries to correct violations. The most meaningful change proposed would allow plan fiduciaries to self-correct one of the most common retirement plan fiduciary violations: late deposits of employee salary deferrals and loan payments into the plan.

To correct an error under the VFCP today, a plan fiduciary must file an application and other paperwork with the DOL for approval. If the application is complete and all breaches are fully corrected, the DOL will issue a no-action letter, providing relief from civil penalties and enforcement actions, as well as excise taxes for some of the covered transactions. With the proposed update, plan fiduciaries would be allowed to notify the DOL electronically that they save self-corrected the failure to deposit participant contributions on time. Plan fiduciaries could use this self correction option only if the following requirements are met:

• Delinquent contributions and lost earnings are deposited into the plan within 180 days of being withheld from the participant’s wages or receiving the amount from the participant.


• Lost investment earnings, calculated from date of withholding or receipt, don’t exceed $1,000.


• Self-correctors use the VFCP online calculator to calculate lost earnings and an online web tool to complete and file a self-correction component notice. Self-correctors must also complete and retain the self-correction retention record checklist.


• Neither the plan nor the self-corrector is under investigation.

The DOL is accepting public comments on the proposed VFCP changes and will announce when the updated program is available. In the meantime, plan fiduciaries may use the existing program.

Caution: Even if you correct late deposits under the VFCP, you still must report them on the plan’s Form 5500. If you don’t indicate on Form 5500 that the late deposits were corrected under the VFCP, it may be a red flag for the DOL.