Skip to main content

You are here


ARA Pushes for Additional Changes to VFCP Self-Correction Option

The American Retirement Association applauds the Department of Labor’s proposed addition of a self-correction option for delinquent participant contributions and loan repayments under the Voluntary Fiduciary Correction Program (VFCP) but contends that important clarifications are needed for plan fiduciaries to fully utilize the new option.

The ARA’s April 17 letter builds off its January 2023 comments after the DOL reopened the VFCP comment period following changes made by the SECURE 2.0 Act of 2022.[1] The DOL’s Employee Benefits Security Administration (EBSA) in November 2022 (prior to enactment of SECURE 2.0) had published proposed modifications to simplify and expand the original VFCP, as well as amend Prohibited Transaction Exemption 2002-51.

“We commend the Department for proposing to allow plan sponsors to self-correct and notify the Department in lieu of filing a full VFCP application. The ARA believes that the ability to correct errors on a voluntary basis enhances compliance and supports employers’ interest in sponsoring retirement programs for their employees,” wrote the ARA’s Executive Director and CEO Brian Graff, and General Counsel Allison Wielobob.

In fact, the ARA has been advocating for a self-correction component to the VFCP for more than 10 years. And in this letter, the ARA offers several specific recommendations that the organization believes will help make the proposed VFCP changes more feasible for more plans.   

Increase Limit on Lost Earnings to Make Self-Corrections


Chief among the ARA’s recommendations is to increase the proposed cap on lost earnings. Under the proposal, the self-correction component (SCC) will be available for correction of late contribution errors only when the “lost earnings” amount due to the plan is $1,000 or less, thus allowing quicker correction of smaller errors. While recognizing that a fiduciary self-correction program should generally be limited to relatively minor errors, the ARA is concerned that the $1,000 limit may preclude larger plan sponsors from accessing the program simply because of the scale of their plans’ regular transactions.  

“We believe that if the Department implements a self-correction program, both large and small plan sponsors should have the opportunity to use it,” the ARA’s Wielobob explains.

Instead, the ARA recommends the DOL set a higher fixed dollar cap (of at least $2,500, indexed for inflation) and/or provide an alternative cap, scaled to a small percentage of total plan assets. “We believe this change would allow larger employers to use the SCC without compromising the objective of efficient correction of relatively minor fiduciary errors,” Wielobob further emphasizes. 

Extend Time Limit for Self-Correction


The ARA further urges the DOL to extend the eligibility for the SCC to include delinquent participant contributions or loan repayments remitted to the plan from 180 days to the due date for filing the Form 5500 for the year in which the breach occurred.

The ARA believes that the proposed 180-calendar-day requirement is too restrictive, especially for small plans where the failure to timely contribute participant salary deferrals is most likely discovered after the end of the plan year, when contributions and deposits are reconciled by a plan service provider. Moreover, delinquent contributions in small plans are usually limited to smaller amounts and they should be correctable without active engagement by the DOL, the ARA suggests. “Allowing additional time to discover and correct these delinquent contributions will assist plan sponsors seeking to remedy defects at the time when they typically are discovered by encouraging a faster and cost-effective correction method.”

Retention Record Checklist


To use the SCC under the proposal, each fiduciary seeking relief would have to sign a statement under penalty of perjury that they have reviewed all the documentation required in the SCC retention record.

While noting that it understands the DOL’s need to understand where a compliance problem occurred and the measures taken to prevent it from recurring, the ARA recommends that “Appendix F” materials not be subject to a penalty of perjury statement in order to avoid a “chilling effect” that such a statement could have on utilization of the SCC.

“We are concerned that such a requirement would deter fiduciaries or others who might otherwise seek to take advantage of the SCC from doing so,” the ARA states. The letter further explains that in the day-to-day operation of plans, there may be breakdowns in contribution remission processes which are caused by multiple factors that could involve the plan sponsor, payroll provider, third party administrator, record keeper, trustee or others.

Small Plan Criteria


The DOL also specifically seeks comments regarding whether the SCC should incorporate additional protections for pension plans that are classified as small based on their participant population, such as limiting the participation of small plans to only those whose plan sponsors comply with the safe harbor standard in 29 CFR 2510.3–102(a)(2) for the timely handling of participant contributions.

In this case, the ARA strongly disagrees that any additional requirements should be imposed upon the fiduciaries of small plans. “Such additional requirements may have a chilling effect on use of the SCC by small plan fiduciaries, which does not support the objectives of the Department or the industry,” the ARA notes.

Additional recommendations by the ARA include the following:

  • The VFCP could be better coordinated with the IRS’ Employee Plans Compliance Resolution System (EPCRS).
  • The DOL should expand the online calculator under the VFCP to include excise tax amounts, coordinating with the Treasury Department and IRS as necessary.
  • The DOL should amend the VFCP to provide that participant loan failures self-corrected under EPCRS be considered to meet the requirements of VFCP.

As a reminder, the existing program and exemption will remain available until the DOL publishes final revisions taking into account the latest stakeholder comment period, which closed April 17th.


[1] Section 305 of SECURE 2.0 expands the IRS’ EPCRS to allow more types of errors to be self-corrected, including certain violations related to participant loans.