Voluntary Fiduciary Correction Program

<RULE> DEPARTMENT OF LABOR <SUBAGY>Employee Benefits Security Administration</SUBAGY> <CFR>29 CFR Parts 2560 and 2570</CFR> <RIN>RIN 1210-AB64</RIN> <SUBJECT>Voluntary Fiduciary Correction Program</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Employee Benefits Security Administration, Department of Labor. <HD SOURCE="HED">ACTION:</HD> Notification of adoption of Updated Voluntary Fiduciary Correction Program. <SUM> <HD SOURCE="HED">SUMMARY:</HD> This document contains an amended and restated Voluntary Fiduciary Correction Program (VFC Program or Program) under title I of the Employee Retirement Income Security Act of 1974, as amended (ERISA). The VFC Program is designed to encourage correction of fiduciary breaches and compliance with the law by permitting persons to avoid potential Department of Labor civil enforcement actions and civil penalties if they voluntarily correct eligible transactions in a manner that meets the requirements of the Program. The amendments to the Program simplify and expand the VFC Program to make the Program easier to use and more useful for employers and others who wish to avail themselves of the relief provided. Specifically, the Program amendments add a self-correction feature for delinquent transmittal of participant contributions and loan repayments to a pension plan under certain circumstances; clarify some existing transactions eligible for correction under the Program; expand the scope of other transactions currently eligible for correction; and simplify certain administrative or procedural requirements for participation in and correction of transactions under the VFC Program. In addition, the amendments implement section 305(b)(2) and (3) of the SECURE 2.0 Act of 2022 (SECURE 2.0 Act) by adding a self-correction feature for certain participant loan failures self-corrected under the Internal Revenue Service's Employee Plans Compliance Resolution System (as described in Rev. Proc. 2021-30, or any successor guidance) (IRS's EPCRS). </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> The amendments to the VFC Program contained in this document are effective on March 17, 2025. </EFFDATE> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Brian J. Buyniski or Yolanda Wartenberg, Office of Regulations and Interpretations, Employee Benefits Security Administration (EBSA), (202) 693-8500, for questions regarding the VFC Program amendments in this document. Emily Harris, Office of Exemption Determinations, EBSA, (202) 693-8540, for questions regarding the amended associated class exemption PTE 2002-51. James Butikofer, Office of Research and Analysis, EBSA, (202) 693-8410, for questions regarding the regulatory impact analysis. (These are not toll-free numbers.) <E T="03">For general questions regarding the VFC Program:</E> contact Dawn Miatech-Plaska, Office of Enforcement, EBSA, (202) 693-8691. For questions regarding specific applications and self-corrections under the VFC Program: contact the appropriate EBSA Regional Office listed in appendix C. (These are not toll-free numbers.) <E T="03">Customer Service Information:</E> Individuals interested in obtaining information from the Department concerning ERISA and employee benefit plans may call the EBSA Toll-Free Hotline, at 1-866-444-EBSA (3272) or visit the Department's website ( <E T="03">www.dol.gov/ebsa</E> ). </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">A. Summary Overview</HD> The Voluntary Fiduciary Correction Program (VFC Program or Program) gives plans and fiduciaries a ready means to correct violations of ERISA, without the transaction costs and burden associated with enforcement actions for violations of the fiduciary standards in title I of ERISA), 29 U.S.C. 1132(a)(2) and 1132(a)(5). As an enforcement policy, the Program simultaneously promotes compliance with the law, correction of violations, and the efficient use of scarce enforcement resources. The Department also has the authority under section 408(a) of ERISA (29 U.S.C. 1108) to issue exemptions from the prohibited transaction rules in sections 406 and 407 of ERISA (29 U.S.C. 1106 and 1107) and in section 4975 of the Internal Revenue Code (Code). <SU>1</SU> <FTREF/> Accordingly, in tandem with this amendment to the Program and in this same issue of the <E T="04">Federal Register</E> , the Department has also published associated amendments to Prohibited Transaction Exemption (PTE) 2002-51, which implements important components of the VFC Program. <FTNT> <SU>1</SU>  Under Reorganization Plan No. 4 of 1978, 5 U.S.C. App., the authority of the Secretary of Treasury to issue exemptions pursuant to Code section 4975 was transferred, with certain exceptions not relevant here, to the Secretary of Labor. </FTNT> The EBSA adopted the VFC Program in 2002, and later revised it in 2005 and 2006. <SU>2</SU> <FTREF/> EBSA designed the VFC Program to encourage employers and plan fiduciaries to voluntarily comply with ERISA and allow those potentially liable for certain specified fiduciary breaches under ERISA to voluntarily apply for relief from civil enforcement actions and certain civil penalties, provided they meet the Program's criteria and follow the procedures outlined in the Program. <FTNT> <SU>2</SU>  67 FR 15062 (March 28, 2002), 70 FR 17516 (April 6, 2005), 71 FR 20262 (April 19, 2006). </FTNT> Although the Department is not required to seek public comments on changes to an enforcement policy, in November 2022, EBSA published proposed revisions to the VFC Program with a request for public comments. The Department also proposed amendments to PTE 2002-51 for coordination. Additionally, because the VFC Program includes information collections that are subject to the Paperwork Reduction Act, the Department sought public comment in the November 2022 proposal on the revisions to the information collections included in the amendments to the VFC Program. The proposal discussed the revisions and incorporated them into a restatement of the VFC Program in its entirety for ease of reference. Comments received on the 2022 VFC Program proposed revisions and the proposed amendments to the related class exemption are posted on EBSA's website. After careful consideration of the issues raised in the comment letters, EBSA decided to adopt final changes to the Program as discussed herein. In tandem with this publication of the 2025 VFC Program, EBSA is publishing final amendments to PTE 2002-51 to conform with certain revisions in the 2025 VFC Program. For a discussion of the amendments to the class exemption and the public comments to those changes, see amended PTE 2002-51, which is also published elsewhere in this issue of the <E T="04">Federal Register</E> . With these amendments, EBSA intends to facilitate more efficient and less costly corrections of fiduciary breaches under the Program, encourage greater participation in the Program, and respond to requests from stakeholders for adjustments based on their experiences using the Program. In this regard, the amendments are designed to simplify the Program and make it easier to use by employers and others who wish to avail themselves of the relief provided. Notably, the new self-correction procedures will apply to the transaction most frequently corrected under the Program—the delinquent transmittal of participant contributions and loan repayments to pension plans—as well as to certain participant loan failures self-corrected under IRS's EPCRS. The amendments also clarify language and simplify certain administrative and procedural requirements for participation in and correction of transactions under the Program. This includes revisions to eligibility criteria that allow the submission of applications covering multiple plans by a single service provider under certain circumstances ( <E T="03">i.e.,</E> bulk applicants), as well as additional flexibility in the corrections methods for several violations. The Department anticipates that many users of the Program, as amended, will find it improved and less resource intensive, without sacrificing protections of the affected plans. The following section of this document is an overview of the 2025 VFC Program and the Department's response to issues raised in the public comments. This document includes a restatement of the Program in its entirety to facilitate reference to and future use of the Program as amended. <HD SOURCE="HD1">B. Overview of Changes in the 2025 VFC Program</HD> The 2025 VFC Program retains the fundamentals of the 2006 VFC Program. The Program describes how to apply for relief, lists the specific transactions covered, <SU>3</SU> <FTREF/> and sets forth acceptable methods for correcting fiduciary breaches under the Program. It also provides examples of potential breaches and related permissible corrective actions. The Program defines the term “Breach” to mean any transaction that is or may be a violation of the fiduciary responsibilities contained in part 4 of title I of ERISA. The Program also provides a model application form, a checklist, and an online calculator for determining correction amounts. The VFC Program will continue to be administered in EBSA Regional Offices. Eligible applicants that satisfy the terms and conditions of the VFC Program application process receive a “no action” letter from EBSA and are not subject to civil monetary penalties for the corrected transactions. Excise tax relief for six specific VFC Program transactions is conditionally available under the amended associated class exemption, PTE 2002-51. <SU>4</SU> <FTREF/> <FTNT> <SU>3</SU>  EBSA acknowledges that it has experience with certain transactions fitting within one or more of the listed categories of transactions, even if not specifically named in the category, for example certain transactions involving contribu ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 303k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━