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Proposed Changes to DOL Program Would Allow Plan Fiduciaries to Self-Correct Certain Errors

A proposed rule released last week would amend the U.S. Department of Labor's Voluntary Fiduciary Correction Program ("VFCP") to allow for self-correction by plan fiduciaries in certain circumstances. The VFCP allows plan fiduciaries to potentially avoid ERISA's civil penalties by disclosing and correcting fiduciary errors in their benefit plan administration. Currently, this program requires a formal application with the Department to qualify for the relief. This application requirement is often viewed as a major hurdle to VFCP participation by fiduciaries, given that the time and expense involved in preparing the application can easily dwarf the magnitude of the potential penalties for minor errors.

The proposed revisions to the program would allow self-correction of de minimis late participant contributions or loan repayments—easily two of the most prevalent VFCP issues—if certain criteria are met. Fiduciaries would still be required to notify the Department of Labor regarding any self-correction action taken pursuant to this new opportunity but would no longer need to secure Department approval. Another linked Prohibited Transaction Exemption proposal would enhance the availability of prohibited transaction relief related to correction of these errors under VFCP.

In addition to the welcome proposals relating to self-correction, the proposed rule also restates the VFCP in its entirety, and in so doing, both clarifies and expands what transactions would qualify for VFCP relief. The restatement also simplifies the administrative and procedural requirements for obtaining that relief.

It is important to note that these changes are not yet effective and that the new self-correction option is not available at this time. It is possible that some aspects will change in any final version, based upon feedback that the Department of Labor receives during the public comment period.

© 2022 Miller, Canfield, Paddock and Stone PLC National Law Review, Volume XII, Number 326

About this Author

Brian Gallagher Labor & Employment Attorney Miller Canfield Law Firm lansing Michigan
Senior Counsel

As an experienced benefits and executive compensation attorney, Brian Gallagher helps employers navigate the complicated and ever-changing legal landscape of ERISA and the Tax Code. Brian works closely with employers of all sizes in many different industries to design and maintain their benefit plans, ensure compliance and develop practical solutions when mistakes inevitably do occur.

Brian is currently serving as the Treasurer of the Taxation Section of the State Bar of Michigan and previously chaired its Employee Benefits Committee. Named a '...

Samantha A. Kopacz Labor & Employment Attorney Miller, Canfield, Paddock and Stone Troy, MI

Samantha Kopacz's practice centers around the design, implementation and administration of employee benefit plans and executive compensation arrangements. Sam has more than a decade of experience representing employers, trustee boards, group health plans, insurance companies, and third-party administrators in regulatory and compliance issues related to qualified and non-qualified retirement plans, health and welfare plans, fringe benefit plans, and executive compensation and incentive programs.

Sam has extensive experience structuring and advising on defined contribution plans (such...

Samuel L. Parks  Tax Lawyer Employment and Labor Troy, Michigan, Miller Canfield

Samuel Parks is an associate in Miller Canfield's Corporate Group, with a focus on transactional and particularly tax work. He also has experience advising both public and private sector clients on employee benefit issues, including facilitating corrections of plan documentation and operational compliance failures, as well as drafting plan documentation and participant communications. A graduate of the University of Michigan Law School, he has previously worked at the Michigan Supreme Court and the Washtenaw Public Defender's Office.