CLIENT ALERT: U.S. Department of Labor to Permit the Self-Correction of Late Contributions and Loan Repayments Under its Fiduciary Correction Program

The U.S. Department of Labor (“USDOL”) recently revised its Voluntary Fiduciary Correction Program (“VFCP”) to provide employers with the means to voluntarily self-correct certain fiduciary breaches. This is the first of such changes in close to 20 years. Beginning March 17, 2025, self-corrections may be made for certain delinquent participant contributions (or the late deposit of employee elective deferrals) and loan repayments for small dollar amounts.

Until now, corrections could only be made with the filing of a formal VFCP application with the USDOL. If such application was approved, the USDOL would issue a “no action” letter. The new streamlined self-correction procedure now allows plan sponsors to self-correct through the VFCP directly.

This new procedure is available for eligible plans where the plan or plan sponsor is not under “investigation” as defined by the VFCP and is available regardless of the number of plan participants or assets. The plan sponsor must sign a penalty of perjury statement, as well as prepare and keep various documents as proof of the corrective actions and payments.

In contrast to the formal corrections submitted under the VFCP, the USDOL Employee Benefit Security Administration will not issue a no action letter and applicants will not be subject to civil monetary penalties or civil enforcement consequences. However, plan sponsors must still report their delinquent participant contributions on their annual Form 5500 filings pursuant to the existing requirements. In addition to the VFCP changes, similar changes were made to expand excise tax relief under Prohibited Transaction Exemption 2002-51. This means that a class exemption, which provides for excise tax relief for certain transactions corrected under the VFCP, will now be extended for corrections of delinquent participant contributions and loan repayments.

The requirements for self-correction under the VFCP include the following:

• Late contributions or loan repayments must be transmitted to the Plan within 180 days of withholding from a participant or received by the plan sponsor.
• Lost earnings must be calculated from the date the contributions or late payments were withheld from the employee or received by the employer.
• The USDOL’s online calculator must be used to calculate the lost earnings.
• The amount of the lost earnings on late contributions or loan repayments may not exceed $1,000 (per payroll period).
• An electronic notice must be filed with the USDOL including the plan sponsor’s name, email address, EIN, plan number, number of participants affected, principal amount of the correction, date of loss, lost earnings and date paid.
• Plan sponsors must include a certification under Penalties of Perjury by the employer or plan fiduciary.
• A Retention Record Checklist and documentation of the correction must be retained by the plan administrator.

Our Employee Benefits Practice Group can help you understand these important changes to the USDOL’s correction program. Please contact the Olshan attorney with whom you regularly work or the Practice Group Leader, Stephen Ferszt, if you would like to discuss how to take advantage of this new program or have any questions.

This publication is issued by Olshan Frome Wolosky LLP for informational purposes only and does not constitute legal advice or establish an attorney-client relationship. In some jurisdictions, this publication may be considered attorney advertising.
Copyright © 2025 Olshan Frome Wolosky LLP. All Rights Reserved.