The U.S. Department of Labor (the “DOL”) proposed changes to its Voluntary Fiduciary Correction Program (the “VFCP”) in November for the first time since 2006. The most significant change is the addition of a self-correction option for delinquent deposits of participant contributions and loan repayments. The other changes clarify and expand certain existing aspects of the VFCP. The DOL also proposed conforming changes to the prohibited transaction class exemption, PTE 2002-51, associated with the VFCP.
Although the proposal of a self-correction option has created a “buzz,” the proposed option would only be available if certain conditions are satisfied, including the following:
- The employer remits the delinquent participant contributions or loan repayments within 180 calendar days of withholding or receipt;
- The employer computes the “lost earnings” using the VFCP’s online calculator from the date of withholding or receipt and the lost earnings do not exceed $1,000; and
- The employer files a self-correction notice with the DOL and retains certain records similar to the records that would need to be submitted with a filing under the VFCP today.
The notice requirement stands in contrast to self-corrections under the Internal Revenue Service’s Voluntary Correction Program, which does not require the submission of a notice to the Service following a self-correction. The DOL is accepting comments on the proposed changes through January 20, 2023, and it remains to be seen whether the DOL loosens the proposed requirements for self-correction in response to comments.