Key Takeaways
- The DOL’s VFCP update is now effective and includes a self-correction path for limited ERISA fiduciary breaches.
- Self-correction applies to certain late deposits and loan errors with lost earnings of $1,000 or less.
- Plan sponsors must correct issues within 180 days and retain documentation, even without a DOL no-action letter.
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Understanding the VFCP Update
Effective compliance with fiduciary responsibilities under ERISA remains key to managing your employee benefit plans. While many plan sponsors maintain strong oversight, errors can and do occur, so it’s important to be vigilant. The Department of Labor (DOL) has long offered a path to voluntary remediation through the Voluntary Fiduciary Correction Program (VFCP) to address certain fiduciary breaches.
As of March 17, 2025, the VFCP includes a new Self-Correction Component (SCC), which provides additional flexibility to resolve specific issues without submitting a full application. This enhancement may influence how plan sponsors approach correction procedures going forward.
What Is the Voluntary Fiduciary Correction Program?
Ultimately, the DOL established the VFCP to encourage fiduciaries to voluntarily correct losses suffered by employee benefit plans due to breaches of ERISA fiduciary duties. The program provides a structured process to help you address specific fiduciary violations that resulted in financial harm to the plan.
According to DOL guidance, as a plan sponsor who’s complete the VFCP process, you may:
- Avoid potential civil enforcement actions by the DOL.
- Gain greater clarity around your fiduciary responsibilities.
- Help restore your plan integrity by remediating errors.
Fiduciaries can apply to the VFCP if they are not currently “under investigation” as defined by the program. The standard process includes compiling documentation, calculating corrective payments (including lost earnings), and submitting a complete application package. If the DOL concurs with the submission, it issues a “no action” letter, which indicates that no further enforcement will be pursued for the corrected issue.
How the VFCP Update Impacts Fiduciary Correction Procedures
DOL’s recent update to the VFCP introduces the Self-Correction Component (SCC), simplifying the correction process for certain limited ERISA compliance failures. The SCC went into effect on March 17, 2025.
What the SCC Covers
Under the SCC plan, sponsors and fiduciaries may resolve certain issues without submitting a full VFCP application. Instead, you will need to submit a notice through DOL’s online tool. Note that the SCC applies only to the following situations:
- Delinquent participant contributions or loan repayments — if the total lost earnings are $1,000 or less.
- Eligible inadvertent participant loan failures, where you didn’t comply with plan provisions such as repayment schedules or loan limits.
Process and Documentation Requirements
Unlike the traditional VFCP, SCC submissions don’t result in a no-action letter. Instead, the DOL simply acknowledges receipt of the submission. While this doesn’t carry the same legal weight, it does demonstrate a fiduciary’s good-faith effort to correct the issue.
To qualify:
- Your corrections must be completed within 180 days of failure or withholding.
- You should monitor remittances more frequently — monthly or per payroll — rather than relying solely on year-end reviews.
Fiduciaries must also complete the SCC Record Retention Checklist and provide documentation to the plan administrator, including:
- A written explanation of the error
- Proof of correction and payment of lost earnings
- Results from DOL’s Online Calculator
- Updated procedures to prevent recurrence.
- SCC notice acknowledgment and summary
- A signed Penalty of Perjury Statement
Practical Considerations
While SCC offers a more efficient resolution pathway, it’s not a replacement for fully correcting prohibited transactions under ERISA. Plan sponsors should assess whether additional process improvements — such as remittance tracking or loan monitoring — are necessary to help prevent recurring issues.
Other Correction Options Outside the VFCP
The VFCP isn’t the only method available to you to correct fiduciary breaches. In some cases, plan sponsors may choose to correct issues outside the program. This typically involves:
- Restoring affected amounts to the plan, including lost earnings.
- Filing IRS Form 5330 to report and pay any excise tax.
These steps generally resolve the issue — from the IRS’s perspective. However, the DOL may still view the error as a fiduciary breach under ERISA. Because of this, you may want to opt to use the VFCP to limit your potential enforcement exposure.
It’s critical that you continuously monitor any errors and resolve them quickly to maintain your ERISA compliance and safeguard your plan assets.
The Path Ahead
Further guidance from the DOL may clarify whether the SCC applies only to transactions occurring on or after March 17, 2025, or retroactively to earlier events. On March 18, 2025, DOL released a model Notice to Interested Parties to support SCC submissions.
You should evaluate which correction path — VFCP, SCC, or an alternative — is most appropriate based on the facts and timing of each case.
Supporting Plan Sponsors with Regulatory-Focused Audit Services
MGO provides employee benefit plan audit services tailored to meet the complex and evolving requirements of ERISA, DOL, and IRS regulations. Considering updates to programs like the Voluntary Fiduciary Correction Program, accurate reporting and proactive oversight are critical. Our experience spans a wide range of plan types — including 401(k), 403(b), defined benefit, and health and welfare plans — allowing us to deliver audit services aligned with fiduciary responsibilities and regulatory expectations. We assist plan sponsors in meeting their obligations with confidence in today’s dynamic compliance environment. Contact us to learn more.