Government Creates 'Oops, My Bad' Program for Retirement Mistakes
Published Date: 1/15/2025
Rule
Summary
The updated Voluntary Fiduciary Correction Program helps employers and plan managers fix mistakes with retirement plans without facing penalties. It’s easier to use, covers more types of fixes, and adds a way to self-correct late payments and loan issues. These changes kick in on March 17, 2025, giving folks a smoother path to stay on the right side of the law and protect workers’ retirement money.
Analyzed Economic Effects
6 provisions identified: 3 benefits, 2 costs, 1 mixed.
Self-correction avoids DOL penalties
If you run or manage an employer retirement plan, starting March 17, 2025 you can use the VFC Program self-correction component (SCC) to fix late participant contributions or loan repayments and avoid Department of Labor civil monetary penalties or enforcement actions if you meet the Program's conditions. EBSA still reserves the right to investigate the correction.
Lost Earnings $1,000 cap limits SCC
The SCC is available only when the Lost Earnings on the delinquent participant contributions or loan repayments are $1,000 or less (this excludes any excise tax amounts paid under PTE 2002-51). If Lost Earnings exceed $1,000, you cannot use the streamlined SCC.
180-day remittance deadline
To use the SCC you must remit the delinquent participant contributions or loan repayments to the plan within 180 calendar days from the date they were withheld from pay or received by the employer. Delinquencies remitted after 180 days are not eligible for the SCC.
Electronic notice and perjury requirement
Self-correctors must submit an electronic SCC notice through EBSA's online VFC web tool that includes the self-corrector contact, plan name, plan sponsor EIN, plan number (PN), Principal Amount, Lost Earnings and date paid, Loss Date(s), and number of participants; they must retain specified records and sign a penalty-of-perjury statement attesting the submission is true and complete.
Plan assets can't fund corrections
Corrections under the VFC Program—including Principal Amount and Lost Earnings—may not be paid from plan assets or plan forfeitures; the cost of correction cannot be charged against participant accounts or the plan's forfeiture account.
IRS EPCRS loan self-corrections accepted
The VFC Program (section 7.3(c)) will treat certain participant loan failures that are eligible for and have been self-corrected under the IRS's EPCRS (per SECURE 2.0 section 305) as meeting VFC requirements; this includes some failures to meet Code section 72(p) rules and failures to obtain spousal consent, but excludes egregious misuse or abusive tax-avoidance-related failures.
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Key Dates
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