The Voluntary Fiduciary Correction Program (VFCP) encourages employers and plan sponsors to voluntarily correct certain violations of the Employee Retirement Income Security Act (ERISA). For certain categories of eligible transactions, the Department of Labor (DOL) Employee Benefits Security Administration (EBSA) intends for the 2025 VFCP updates to make navigation easier, facilitate more efficient and less costly corrections of fiduciary breaches, and encourage greater participation, effective March 17, 2025.

The new self-correction component (SCC) provides streamlined correction procedures for certain transactions. The eligible transactions are the delinquent transmittal of participant contributions and loan repayments to retirement plans and certain participant loan failures that are self-corrected under theInternal Revenue Service (IRS) Employee Plans Compliance Resolution System (EPCRS).

According to a DOL fact sheet, participation in the VFCP offers the following benefits:

• Allows employers and plan officials to correct eligible transactions to avoid potential DOL civil enforcement actions
• Helps employers and plan officials better understand and meet their legal responsibilities
• Strengthens the security of workers’ promised retirement and health benefits.

This blog highlights the categories of errors eligible for self-correction and key differences between regular VFCP application and self-correction.

The 2025 rules package includes the following components.

• Notice of adoption of updated VFCP with new self-correction procedures
• Amendments to PTE 2002-51 expand excise tax relief to include corrections made through the SCC.
• Model application form can be used to avoid common application errors that cause processing delays or rejections.
• VFCP Application Checklist (required for regular VFCP)
• SCC Retention Record Checklist (required for self-correction delinquent participant contributions only, not loan failures)
• Online calculator for determining correction amounts. Self-correctors must use the online calculator to determine lost earnings and print a copy of the “view printable results” page. DOL does not monitor data you enter online, and you cannot save calculations online.

Five Steps in the General Correction Process

The first three steps of the procedure to correct violations are similar between SCC and regular VFCP, while steps four and five are different as outlined below.

1. Identify any violations and determine if they qualify as transactions covered by the VFCP.
2. Follow the process for correcting specific violations.
3. Calculate and restore any losses or profits with interest, if applicable, and distribute any supplemental benefits to participants.
4. Submit or compile documentation of the correction.
   1. Key differences in how correctors submit
      1. SCC: The self-corrector must input the required information in the fields provided in the SCC notice and submit the notice to EBSA through the online VFCP tool which will be located on EBSA’s website (not available as of this writing but is expected by March 17, 2025). Supporting documentation is provided to the plan administrator for recordkeeping.
      2. Regular VFCP: Applicants must submit supporting documentation to an EBSA regional office with their application.
5. If correction is satisfied, then EBSA responds.
   1. Key differences in EBSA response
      1. SCC: After filing the SCC notice, self-correctors receive an email acknowledgement from EBSA.
      2. Regular VFCP: After filing the regular application, eligible applicants that satisfy the terms and conditions of the VFCP application process receive a “no action” letter from EBSA and are not subject to civil monetary penalties for the corrected transactions.

New Self-Correction

The SCC allows employers and plan officials to self-correct certain transactions without submitting a regular VFCP application. As described below, instead of a VFCP application, eligible self-correctors submit a SCC notice through EBSA’s online tool and provide specified information. After filing the SCC notice, self-correctors receive an email acknowledgement from EBSA.

Two types of transactions are eligible for the SCC:

1. Delinquent participant contributions and loan repayments to retirement plans (if lost earnings total $1,000 or less)

Participant contributions and loan repayments are considered delinquent when employers retain these payments beyond the time allowed instead of remitting them to the plan. Self-correction is available for delinquent participant contributions and loan repayments to defined contribution and defined benefit plans when lost earnings total $1,000 or less and the following requirements are met.

• Compute lost earnings on the delinquent payments from the date of withholding from participants’ paychecks or receipt by the employer using the online calculator.
• Remit delinquent payments to the plan within 180 calendar days from the date of withholding from participants’ paychecks or receipt by the employer.
• Pay any penalties, late fees and other charges themselves.
• Neither the self-corrector nor the plan is under investigation.

Delinquent participant contributions procedure: Self-correctors must submit an SCC notice with the required information through EBSA’s online tool. They must also collect records related to the correction, including the SCC Retention Record Checklist and a penalty of perjury statement, and provide them to the plan administrator for recordkeeping. Unlike the VFCP application process, self-correctors will receive an email acknowledgment instead of a “no action” letter.

2. Eligible inadvertent participant loan failures

Loan errors require corrections with both IRS and DOL. The SCC allows employers and plan sponsors to self-correct certain errors involving loans from a plan to a participant that can be self-corrected under the IRS EPCRS.

Loan errors that can be self-corrected include:

• Noncompliance with plan provisions regarding the amount, duration, level amortization or number of loans permitted
• Loans that defaulted due to a failure to withhold from the participant’s wages
• Failure to obtain spousal consent for a loan.

Loan failures procedure: First, VFCP/SCC self-correctors must self-correct under the IRS’s EPCRS. Next, self-correctors must submit an SCC notice with the required information through EBSA’s online tool. They must also collect records related to the correction and a penalty of perjury statement and provide them to the plan administrator for recordkeeping. The SCC Retention Record Checklist is not required for correction of this transaction.

Tips and Takeaways

Multiemployer Plans

The 2025 VFCP update addresses multiemployer plans. For the SCC procedure and the regular VFCP application, contributing employers in multiemployer plans may sign and date the penalty of perjury statement and, regardless of the employer’s status as a plan fiduciary, no other plan fiduciary need sign.

Comparing Regular VFCP and SCC

Similarities include supporting documentation and time and effort to compile it are similar. Calculations are also the same. Differences include the method to submit, record retention, and how EBSA communicates approval are different.

Employer and Plan Sponsor Action Steps

While no immediate action is required based on the 2025 VFCP update, it’s a good time to check that appropriate procedures are in place, contributions are timely deposited and loans are properly handled.  If any errors or prohibited transactions occur, work with service providers to determine whether voluntary correction is available. Maintain supporting documentation of corrections.

What We’re Watching

Time will tell how many plan sponsors opt for self-correction. The online VFCP tool will be located on EBSA’s website on or before March 17, 2025. The IRS is expected to release an updated EPCRS. The International Foundation will update members on these developments.

Developed by International Foundation Information Center staff. This does not constitute legal advice. Please consult your plan professionals for legal advice.