# Voluntary Fiduciary Correction Program > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A2025-00327 ## Record - **Collection:** Federal Register - **Document type:** Rule - **Published:** January 15, 2025 - **Citation:** 90 FR 4192 ## Text DEPARTMENT OF LABOR Employee Benefits Security Administration 29 CFR Parts 2560 and 2570 RIN 1210-AB64 Voluntary Fiduciary Correction Program AGENCY: Employee Benefits Security Administration, Department of Labor. ACTION: Notification of adoption of Updated Voluntary Fiduciary Correction Program. SUMMARY: 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). DATES: The amendments to the VFC Program contained in this document are effective on March 17, 2025. FOR FURTHER INFORMATION CONTACT: 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.) For general questions regarding the VFC Program: 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.) Customer Service Information: 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 ( www.dol.gov/ebsa ). SUPPLEMENTARY INFORMATION: A. Summary Overview 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). 1 Accordingly, in tandem with this amendment to the Program and in this same issue of the Federal Register , the Department has also published associated amendments to Prohibited Transaction Exemption (PTE) 2002-51, which implements important components of the VFC Program. 1 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. The EBSA adopted the VFC Program in 2002, and later revised it in 2005 and 2006. 2 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. 2 67 FR 15062 (March 28, 2002), 70 FR 17516 (April 6, 2005), 71 FR 20262 (April 19, 2006). 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 Federal Register . 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 ( i.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. B. Overview of Changes in the 2025 VFC Program 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, 3 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. 4 3 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 contributions in kind under section 7.4(a) of the Program. EBSA encourages potential applicants to discuss eligibility and similar issues with the appropriate regional VFC Program coordinator. 4 Stakeholders interested in a discussion of the components of the VFC Program that are not being revised in this document should review the Federal Register notices announcing the original 2002 Program and the 2005 and 2006 updates, as well as the 2022 proposed revisions to the Program. See 67 FR 15062 (March 28, 2002), 70 FR 17516 (April 6, 2005), 71 FR 20262 (April 19, 2006), and 87 FR 71164 (Nov. 21, 2022). For PTE 2002-51, see 67 FR 70623 (2002); 71 FR 20135 (2006), and 87 FR 70753 (Nov. 21, 2022). Prior to adoption in March 2002, the VFC Program was made available on an interim basis during which the Department invited and considered public comments on the Program. See 65 FR 14164 (March 15, 2000). The most significant changes to the VFC Program involve the addition of two new self-correction features. The first is in section 7.1(b) for certain failures to timely transmit participant contributions (and participant loan repayments) to pension plans, 5 and the second is in section 7.3(c) for certain participant loan failures self-corrected under IRS's EPCRS. The other Program amendments in this document: (1) clarify existing transactions eligible for correction under the Program; (2) expand the scope of certain transactions currently eligible for correction; and (3) simplify certain administrative or procedural requirements for participation in the VFC Program and correction of transactions under the Program. A more detailed summary of the Program revisions is set forth below in this preamble. 5 The term pension plans include both defined contribution plans and defined benefit plans. See ERISA section 3(34) and 3(35). 1. Self-Correction Component for Delinquent Participant Contributions to Pension Plans—Section 7.1(b) The 2025 VFC Program includes a new self-correction component (SCC) for failures to timely transmit participant contributions (and participant loan repayments) to pension plans in specified circumstances. The new SCC adds a more streamlined correction mechanism than is currently available under section 7.1(a) for instances in which employers have retained participant contributions or loan repayments beyond the time contemplated by the Department's regulations at 29 CFR 2510.3-102. This transaction, referred to as “delinquent participant contributions,” is the type of transaction most frequently corrected under the Program. The Department received input from stakeholders who said the time and expense required to file a VFC Program application with the Department is a disincentive to use the Program to correct delinquent participant contribution transactions, especially when they involve small dollar amounts. Many of the comment letters submitted on the 2022 VFC Program proposed revisions expressed support for the self-correction feature, pointing out that it will promote voluntary, timely, and efficient correction of errors; increase compliance; eliminate unnecessary administrative requirements and costs; free up EBSA resources; and help ensure participants' retirement savings are secure. One commenter expressed concern, however, that the elimination of notices or official approvals in the final Program could open the Program to abuse and create an impression that no one is monitoring the system. After carefully considering the public comments, the Department agrees that a streamlined self-correction feature for delinquent participant contributions to pension plans with appropriately designed safeguards will encourage more voluntary corrections by employers and other persons who are in a position to correct a Breach (Plan Officials). It will also enable EBSA to better allocate resources currently dedicated to processing VFC Program applications for these transactions. Accordingly, the 2025 VFC Program adds the SCC as the correction method for the list of eligible transactions in section 7.1(b) entitled “Delinquent Participant Contributions and Loan Repayments to Pension Plans under the Self-Correction Component.” 6 6 To reflect the inclusion of the SCC into the Program, section 6 has been renamed “VFC Program Application and Self-Correction Component Procedures” and the prior section 6 has been renamed and re-designated as section 6.1 “VFC Program Application Procedures.” Under the final amendments, relief under the SCC for delinquent participant contributions and delinquent plan loan repayments is available in connection with any pension plan regardless of the size of the plan's participant population or amount of plan assets, so long as the applicant is eligible to use the Program and meets the conditions discussed below. While self-correctors that satisfy the terms and conditions of the VFC Program do not receive a no-action letter from EBSA, the SCC provides that compliance with the Program's terms and conditions will avoid the imposition of civil monetary penalties or an EBSA civil enforcement action against the SCC participant. As with any application under the Program, however, and in accordance with section 2(b) “Verification,” EBSA reserves the right to conduct an investigation with respect to the transaction corrected through the SCC, to determine the truthfulness and completeness of the factual statements set forth in the SCC notice and to confirm the corrective action was in fact taken. (a) Self-Correction Component $1,000 Lost Earnings Amount Limit—Section 7(b)(1)(ii)(A) Eligibility to use the SCC in section 7.1(b) is conditioned on the amount of Lost Earnings 7 on the delinquent participant contributions or loan repayments being $1,000 or less (excluding any excise tax amounts paid to the plan under the related class exemption PTE 2002-51). 7 Section 5(b)(6) defines “Lost Earnings” as an approximate amount that would have been earned by the plan on the Principal Amount, but for the Breach, and sets forth methodology for calculating Lost Earnings for purposes of the SCC. Several commenters recommended eliminating, increasing, or changing the Lost Earnings $1,000 cap. Some of these commenters expressed the view that it would be desirable from a standpoint of cost and efficiency to allow broader availability, while other commenters asserted the cap would restrict large and mid-size plan sponsors from participating and could result in others bifurcating the correction to skirt the limit. Several commenters observed that using the cap on Lost Earnings as determined by the online calculator, which utilizes the Code section 6621(a)(2) underpayment rates, will result in fluctuations leading to inconsistency and confusion with respect to SCC eligibility. A variety of options were recommended by commenters, including increasing the Lost Earnings to $2,500 or $10,000; addition of a cost-of-living adjustment; adopting a cap that varies based on the amount of plan assets or number of participants; and eliminating the cap altogether. Commenters further recommended the Program allow the use of plan's forfeiture accounts to pay for Lost Earnings, arguing that such use would be consistent with the IRS's EPCRS, which allows a plan sponsor to use plan forfeitures to fund corrective allocations in certain circumstances. Another commenter suggested that the Program include a de minimis provision under which Lost Earnings would not have to be calculated and included in corrective payments. Alternatively, the commenter suggested that the Department should allow de minimis Lost Earnings amounts to be paid from the plan's forfeiture account. After consideration of the comments, the Department has determined to finalize the $1,000 Lost Earnings cap as proposed. The Department believes that a substantial majority of delinquencies will be eligible for correction under the SCC even with the $1,000 Lost Earnings cap. 8 However, as noted in the 2022 VFC Program proposed revisions, the $1,000 Lost Earnings cap along with the 180-day remittance deadline (discussed below) are intended to exclude delinquencies from the SCC when the amount or length of delinquency suggest a need for EBSA to actively evaluate the circumstances surrounding the breach and the timing of the correction under the VFC Program application process. The Department believes it is appropriate to retain these protective parameters as it proceeds with a new element of the VFC Program. 8 The 2022 VFC Program proposed revisions estimated that the SCC would streamline the process for 74% of small and large VFC Program applicants involving Lost Earnings less than or equal to $1,000. With respect to the suggestion that the Lost Earnings calculation be based on the amount of plan assets or number of participants, EBSA believes that the Lost Earnings cap should continue to be a fixed figure. The VFC Program, and especially the SCC, is designed to provide simplicity and uniformity with an approach that eliminates complicated requirements for computation. A variable cap based on the total amount of plan assets or the total number of participants, by contrast, would complicate eligibility determinations and the Department's oversight of those determinations, undermining the goal of simplicity. Regarding the use of forfeitures to pay for Lost Earnings, from its inception in 2000, the Program has required that the cost of correction not be paid from plan assets. Lost Earnings is part of the correction amount which is described in section 5(b) as a combination of the Principal Amount involved in the transaction, Lost Earnings, and any interest on the Lost Earnings. It was further clarified in section 5(c) of the 2022 VFC Program proposed revisions that the cost of correction cannot be paid from plan assets, including charges against participant accounts or plan forfeitures accounts. 9 This is still the right approach. It would defeat ERISA's remedial purposes, and undermine enforcement of the law's protections, to permit employers and fiduciaries to shift the cost of the correction to the plan itself, thereby causing new injury to the plan. Thus, this requirement and the clarification regarding forfeitures will continue to be part of the VFC Program. 9 87 FR 71164, 71181 (November 21, 2022). Several commenters seeking clarification of the timeframe to calculate the Lost Earnings cap asked whether each pay period is viewed as a separate transaction. Generally, the Department has considered each pay period as a separate transaction; however, the Department has permitted more than one pay period to be treated as one transaction under the VFC Program if the pay periods are close together in time and the delinquencies are related to the same cause. 10 10 For a discussion on whether each pay period can be viewed as a separate transaction, refer to the associated class exemption, PTE 2002-51 and the Voluntary Fiduciary Correction Program Class Exemption FAQs which can be found in EBSA's website at https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/faqs/vfcp-class-exemption-faqs.pdf. (b) Self-Correction Component 180-Day Contribution Remittance Deadline—Section 7(b)(1)(ii)(B) To be eligible for the SCC in section 7.1(b), the delinquent participant contributions or loan repayments must have been remitted to the plan within 180 calendar days from the date of withholding from participants' paychecks or receipt by the employer. Several commenters argued that a 180-calendar day contribution remittance deadline was too restrictive and suggested extending it to either 120 days following the end of the plan year or until the due date of the Annual Return/Report of Employee Benefit Plans (Form 5500 or Form 5500-SF, as applicable). As noted above, the preamble to the 2022 VFC Program proposed revisions states that the 180-day remittance deadline is designed to exclude delinquencies that suggest the need for EBSA to actively evaluate the circumstances surrounding the breach and the timing of the correction. The Department continues to believe that a failure to identify a delinquency and remit contributions or loan payments due to the plan within 180 days indicates a potentially serious problem with the plan's processes and procedures for handling participant contributions and loan payments. It would not be consistent with prudent fiduciary administration of a plan to wait until the end of the plan year, the completion of the annual audit of the plan for annual reporting purposes, or the due date of the Form 5500 or Form 5500-SF to check for timely transmission of participant contributions and loan repayments. The Department also does not believe it would be appropriate to structure the VFC Program in a way that suggests that it is consistent with ERISA's fiduciary duties to wait until the end of the year, the annual audit, or the filing of the plan's annual report to check for delinquent transmittal of contributions and loan repayments. Accordingly, EBSA has decided to retain this requirement, which has also been part of the class exemption since its inception in 2002, and which is intended to provide protection to participants and beneficiaries especially in situations outside of the full VFC Program application process. (c) Requirements for the Self-Correction Component—Sections 5(b)(3)(ii), 7.1(b)(2)(i) As with the current VFC Program application-based procedure for delinquent participant contribution transactions in section 7.1(a), correction amounts under the SCC consist of the (1) Principal Amount and (2) Lost Earnings, with the Principal Amount being the amount of participant contributions or loan repayments that would have been contributed to the plan if the employer had not retained such amounts and the Lost Earnings being the amount of earnings that would have been earned on the Principal Amount but for the failure to timely remit such amounts to the plan. The SCC requires that Lost Earnings be paid from the “Date of Withholding or Receipt,” and mandates the use of the online calculator to determine the amount of the loss payable to the plan. The term “Date of Withholding or Receipt” means the date the amount would otherwise have been payable to the participant in cash in the case of amounts withheld by an employer from a participant's wages, or the date on which the participant contribution or loan payment is received by the employer in the case of amounts that a participant or beneficiary pays to an employer. The calculation of Lost Earnings from the Date of Withholding or Receipt is a special rule for purposes of the SCC and differs from the calculation of Lost Earnings under the full VFC Program application process, which begins on the earliest date on which the participant contributions or loan repayments could reasonably have been segregated from the employer's general assets ( i.e., the date on which the contributions become plan assets under the Department's regulation at 29 CFR 2510.3-102). Use of the earlier date and the use of the online calculator are important elements of the SCC that are intended to help ensure full correction without the need for the protections afforded by the Program's otherwise applicable application and Department approval process. These elements also will provide self-correctors with certainty that the calculation of Lost Earnings will meet the requirements of the SCC. (d) Self-Correction Component Notice Requirement—Section 7.1(b)(2)(iii) Section 7.1(b)(2)(iii) of the SCC sets forth a requirement for an electronically filed notice (SCC notice) in place of the generally applicable paper application requirements in section 7.1(a)(3) of the Program. The required data elements in the SCC notice include: the name and an email address for the self-corrector; the plan name; the plan sponsor's nine-digit employer identification number (EIN) and the plan's three-digit number (PN); the Principal Amount; the amount of Lost Earnings and the date paid to the plan; the Loss Date (for purposes of the SCC, the Date(s) of Withholding or Receipt); and the number of participants affected by the correction. The SCC notice must be submitted electronically to EBSA using a new online VFC Program web tool located on EBSA's website. Self-correctors using the web tool will receive an automatic EBSA email acknowledging the SCC notice submission. Several commenters asserted that the SCC notice requirement would discourage plan sponsors from using the SCC, although one commenter acknowledged it would not appear to impose a significant burden. Commenters also stated that the SCC notice was unnecessary because delinquent contributions and delinquent loan repayments are already reported on the Form 5500. Another commenter observed that self-correction under the IRS's EPCRS does not require notice to the Internal Revenue Service (IRS), while another commenter proposed a minimum dollar threshold before there would be a requirement for the completion of the SCC notice. However, as discussed above, another commenter expressed concern that any elimination of notices or official approvals can leave open doors for abuse and create the impression that no one is monitoring the system. As noted in the preamble to the 2022 VFC Program proposed revisions, EBSA has been reluctant to adopt overbroad self-correction features because of the danger that it would have insufficient information regarding the breach and correction for which it is providing no-action relief. The decision to adopt the SCC is premised, however, on a conclusion that a well-designed self-correction feature can result in the Department receiving sufficient timely information to meet oversight objectives and ensuring appropriate corrections while also encouraging more Plan Officials to utilize the Program. In the Department's view, a well-designed program requires parties to file the basic data that is necessary for the Department to ensure adequate corrections, and appropriate oversight and accountability for fiduciary violations. Further, although EBSA supports appropriate harmonization of VFC Program provisions with the IRS's EPCRS when dealing with corrections of the same transaction, the Department does not believe that the SCC needs to match the requirements under the Self-Correction Program (SCP) of the IRS's EPCRS in every respect. 11 In addition, EBSA does not believe reporting delinquencies and corrections on the Form 5500 or Form 5500-SF is an adequate alternative to the SCC notice. The SCC notice is intended to provide a relatively contemporaneous report of the delinquency being corrected. Reporting delinquencies and corrections on the Form 5500 or Form 5500-SF may not happen until many months after the delinquency has been corrected. For example, a delinquency that occurs in January of a calendar year plan would not be reported until the end of July or, with a generally available extension, until the middle of October of the following year. EBSA, accordingly, has decided to retain the SCC notice and electronic filing requirements as proposed. 11 Unlike the IRS program, the SCC includes PTE 2002-51, which provides an exemption from the prohibited transaction excise tax for certain transactions identified in the VFC Program. (e) Self-Correction Component “Retention Record Checklist”—Penalty of Perjury Statement—Sections 6.2(d), 6.2(e) and 7.1(b) Self-correctors under the SCC in section 7.1(b) must prepare or collect the documents listed in the SCC Retention Record Checklist, printed below in appendix F, and provide the completed checklist and required documentation to the plan administrator as required under sections 6.2(d) and 7.1(b)(3). Also, to participate in the SCC, a plan fiduciary with knowledge of the transaction that is being self-corrected and each Plan Official seeking relief under the program must sign a penalty of perjury statement as follows: “Under penalties of perjury I certify that I am not Under Investigation (as defined in section 3(b)(3) of the VFC Program) and that I have reviewed the SCC notice acknowledgment and summary, the checklist, and all the required documentation, and to the best of my knowledge and belief the contents are true, correct, and complete.” The penalty of perjury statement also appears in Appendix F. 12 12 As discussed below, the Department made a change in this 2025 VFC Program to permit an employer in a multiemployer plan or multiple employer plan who wishes to correct on its own behalf to sign the application or SCC penalty of perjury statement and, regardless of the employer's status as a plan fiduciary, the penalty of perjury statement need not be signed by another plan fiduciary. See sections 6.1 and 6.2. One commenter opposed the penalty of perjury requirement on the basis that it may have a chilling effect on utilization of the SCC and may increase litigation risk against Plan Officials. However, since its inception in 2002, the VFC Program has required a penalty of perjury statement as a necessary safeguard. 13 As noted in the 2006 Program, EBSA believes that an important result under the Program is a level of certainty that those using the Program have complied with the terms of the Program and have revealed the details of the transaction and the correction. 14 The penalty of perjury statement is part of what provides that level of certainty. Accordingly, the final SCC in section 7.1(b) retains the penalty of perjury statement as a fundamental part of the Program. 13 67 FR 15062, 15068, (March 28, 2002). 14 71 FR 20262, 20265 (April 19, 2006). (f) Self-Correction Component Protections and Frequency of Use In the preamble to the 2022 VFC Program proposed revisions, the Department stated that it had considered but did not include a limit on the frequency with which a self-corrector may use the SCC. 15 The Department explained that it intended instead to monitor participation for frequent use of the SCC and that it may communicate with repeat users or open investigations to identify and correct systemic issues leading to repeated failures to transmit participant contributions in a timely fashion. The Department requested comments on whether the SCC should incorporate other protections for pension plans that are classified as small based on their participant population. For example, EBSA asked whether the SCC should limit small plan participation to only those small plans whose plan sponsors comply with the safe harbor standard in 29 CFR 2510.3-102(a)(2) for the timely handling of participant contributions. The Department noted that compliance could require, for example, either an existing practice or an agreement to put in place a customary practice of depositing participant contributions and loan payments with the plan not later than the 7th business day following the day on which such amount would otherwise have been payable to the participant in cash in the case of amounts withheld by an employer from a participant's wages, or the 7th business day following the day on which the participant contribution or loan payment is received by the employer in the case of amounts that a participant or beneficiary pays to an employer. 15 The proposal noted that the class exemption PTE 2002-51 is generally unavailable to VFC Program applicants that have, within the previous there years, taken advantage of the relief provided by the VFC Program and the exemption for a similar type of transaction. Comments were solicited on whether to eliminate the three-year use limitation in the exemption PTE 2002-51. A discussion of that issue and the Department's conclusion can be found in the final amendment to PTE 2002-51 which appears in this issue of the Federal Register . Commenters generally supported the decision not to impose a limit on the frequency of use of the SCC. One commenter believed that, given the Lost Earnings cap, repeat use of the SCC is unlikely to present a risk to participants. Another commenter argued that plan sponsors will be disincentivized from using the SCC if their frequency of use is monitored by EBSA and asked for guidance as to the level of usage that is likely to generate follow-up inquiries from EBSA. Commenters also asked that no additional requirements be imposed on self-corrections by small plans. They argued additional requirements were unnecessary because the Department retains the right to investigate a plan fiduciary if it fails to meet the SCC requirements and additional requirements could discourage participation in the SCC. One commenter argued that in its experience most small employers followed the 7-business day safe harbor, but a more restrictive standard in the SCC would fail to acknowledge that there are occasions when a particular deposit cannot be reasonably segregated from the employer's general assets within the 7-business day period. The Department has decided not to adopt additional requirements for small plans at this time. As discussed in the preamble to the 2022 VFC Program proposed revisions, EBSA will monitor the use of the SCC and evaluate the potential merit of added requirements based on that data. With respect to the request for guidance on the level of repeat usage of the SCC that might trigger communications from the Department or initiation of an investigation, the Department does not believe a general standard would be appropriate for determining whether repeated use of the SCC will generate an inquiry or investigation. Rather, the Department's actions with respect to any particular repeat user will depend on the facts and circumstances of the individual corrections. (g) Self-Correction Component: Miscellaneous The VFC Program does not relieve plans from reporting delinquent participant contributions on the plan's Form 5500 or Form 5500-SF, as applicable. That remains the case under these amendments to the Program for violations, regardless of whether corrected under the SCC or the application-based component of the VFC Program. A commenter urged the Department to provide guidance on whether and how plan administrators should report use of the SCC on the Form 5500 (Line 4a of the Schedule H or Schedule I for small plans; line 9(a) of the Schedule DCG) or Form 5500-SF (Line 10a). The instructions for the Form 5500 and the Form 5500-SF already specifically address reporting of delinquent contributions. EBSA directs filers to the instructions for the Form 5500 to determine their reporting obligation regarding delinquent participant contributions. The information submitted on the SCC notice enables the Department to cross-reference SCC correctors to the Form 5500/5500-SF data. The Department has a project on its regulatory agenda that involves an evaluation of general improvements to the annual reporting forms and instructions. The Department is open to input on that project from stakeholders related to whether the Department should propose adding questions to the Form 5500 and Form 5500-SF that specifically relate to use of the SCC. In the 2006 VFC Program, the Department rejected a recommendation that EBSA implement a de minimis rule under the VFC Program under which applicants would not be required to correct a previously filed Form 5500 in circumstances where the breach involved a defined de minimis threshold amount of the plan's assets. 16 EBSA continues to believe that such an exception from the requirement to file a complete and accurate annual report is not appropriate. Rather, when a prohibited transaction is not reported or is reported incorrectly on the plan's Form 5500 or Form 5500-SF annual report, the Form 5500 or Form 5500-SF filing must be amended so the plan's annual report correctly reflects the fiduciary breach and prohibited transaction. 16 71 FR 20262, 20266 (2006). Another commenter recommended that the Department create an online excise tax calculator in coordination with the Department of the Treasury. A requirement for the use of the SCC under section 7.1(b)(2)(i) is that the Lost Earnings on the delinquent remittance of participant contributions and participant loan repayments be calculated using the online calculator. This requirement was supported by commenters as a straightforward method to determine the Lost Earnings amount. The Department will consider the recommended addition and consult with the Department of the Treasury, but believes that step is beyond the scope of the current amendments and is not prepared to adopt such an expansion of the online calculator concurrent with this release. 2. Self-Correction Component for Participant Loan Transactions Corrected Pursuant to IRS's EPCRS—Section 7.3 The current VFC Program covers certain participant loans that fail to qualify for ERISA's statutory exemption for plan loan programs in ERISA section 408(b)(1). Specifically, these covered loan transactions are loans in which the terms of the loan did not comply with plan provisions that incorporated requirements of section 72(p) of the Code concerning amount, duration, or level amortization, or which defaulted due to a failure to withhold loan repayments from the participant's wages. The correction under the 2006 VFC Program for these transactions requires that the Plan Official voluntarily correct the loan with IRS approval under the Voluntary Correction Program (VCP) of the IRS's EPCRS and provide to the Department information regarding the correction. In July 2021, IRS updated EPCRS to permit use of SCP for correction of certain participant loan failures. In December 2022, the SECURE 2.0 Act was enacted. Section 305(b)(1) of the SECURE 2.0 Act provides that an “eligible inadvertent failure” related to a loan from a plan to a participant may be self-corrected according to the rules of section 6.07 of Revenue Procedure 2021-30 or any successor guidance. Section 305(b)(2) of the SECURE 2.0 Act requires the Department to treat eligible inadvertent failures related to participant loans that are self-corrected under the IRS's EPCRS as described above as meeting the requirements of the VFC Program “if, with respect to the violation of the fiduciary standards of the Employee Retirement Income Security Act of 1974, there is a similar loan error eligible for correction under the IRS's EPCRS and the loan error is corrected in such manner.” Section 305(b)(3) of the SECURE 2.0 Act permits the Department to impose reporting or other procedural requirements with respect to parties that intend to rely on the VFC Program for correction of these eligible inadvertent failures. The 2022 VFC Program proposed revisions were published for public comment in November 2022 before the SECURE 2.0 Act was enacted, with a comment period closing date of January 20, 2023. Some commenters addressed SECURE 2.0 Act section 305 during that comment period. However, because the amendments were published for public comment before the SECURE 2.0 Act was enacted, the Department reopened the comment period from February 14 to April 17, 2023, to specifically solicit comments on the SECURE 2.0 Act section 305 directive. In the notice reopening the comment period, the Department asked specific questions about section 305 of the SECURE 2.0 Act, including (i) whether VFC Program section 7.3 should be amended to include a paragraph treating participant loan transactions self-corrected under the IRS's EPCRS as meeting the requirements of the VFC Program, (ii) whether the VFC Program should impose additional reporting or other procedural requirements for these specific corrections, and (iii) whether changes were needed to PTE 2002-51. Several commenters expressed general support for the implementation of the changes required by the SECURE 2.0 Act section 305, including support for adding a self-correction component to the VFC Program for participant loans self-corrected in accordance with the SCP of the IRS's EPCRS. The commenters urged the Department to remove requirements in section 7.3 of the VFC Program that correctors must use VCP (under the IRS's EPCRS) and that they must provide the Department with proof of payment and an IRS compliance statement. A commenter further recommended amending section 2 of the VFC Program to provide that EBSA will not initiate a civil investigation or assess civil penalties for participant loan transactions corrected under the SCP of the IRS's EPCRS. Several commenters stated that the Department should not impose any requirements on parties who self-correct plan loans under the VFC Program beyond what is required by the SCP of the IRS's EPCRS. The commenters noted that the SCP of the IRS's EPCRS does not impose notice or reporting requirements for employers that self-correct. One commenter stated that consistency between the IRS's EPCRS and the Department's VFC Program would simplify corrections and reduce burden. A different commenter stated that reporting to EBSA or other procedural requirements are unnecessary because a plan loan that is self-corrected under the SCP of the IRS's EPCRS puts the affected participants in the position they would have been if no failure occurred. One commenter recommended that the Department also include other “eligible inadvertent failures” ( i.e., eligible inadvertent failures other than those relating to loans to participants) in a VFC Program self-correction component as soon as practicable after the IRS provides guidance on the meaning of “eligible inadvertent failures” and how such failures can be self-corrected under EPCRS. After evaluating the comments, and pursuant to section 305 of the SECURE 2.0 Act, the Department is modifying section 7.3 of the VFC Program to accept EPCRS self-corrections of eligible inadvertent failures of participant loan transactions. Specifically, the 2025 VFC Program adds a new self-correction component in section 7.3(c) entitled “Eligible Inadvertent Participant Loan Failures Corrected under the Self-Correction Component.” The description of the transaction set forth in section 7.3(c)(1) states, “A plan extended a loan to a plan participant who is a party in interest with respect to the plan based solely on their status as an employee of any employer whose employees are covered by the plan, as defined in section 3(14)(H) of ERISA. There is an Eligible Inadvertent Participant Loan Failure that involves a Breach as defined in section 3(b)(1) [of the VFC Program].” Section 7.3(c) further provides that an Eligible Inadvertent Participant Loan Failure is a participant loan failure that occurs despite the existence of practices and procedures that satisfy the standards set forth in, and is eligible for correction under, the IRS's EPCRS, and does not include any participant loan failure that is egregious, relates to the diversion or misuse of plan assets, or is directly or indirectly related to an abusive tax avoidance transaction. In addition, in connection with the new provision in section 7.3(c), a new exception is added to section 4 titled “Exception for Eligible Inadvertent Participant Loan Failures” to clarify that a self-corrector is eligible to correct an Eligible Inadvertent Participant Loan Failure under section 7.3(c) even if the plan or the self-corrector is “Under Investigation,” within the meaning of the VFC Program so long as the self-corrector is eligible to correct the participant loan failure under the IRS's EPCRS. 17 17 Under Q&A-4 of Notice 2023-43, once a plan or plan sponsor comes under examination (as defined in section 5.08 of Rev. Proc. 2021-30), an Eligible Inadvertent Participant Loan Failure is no longer eligible for self-correction under the IRS's EPCRS unless the plan sponsor has, before the plan or plan sponsor comes under examination, demonstrated a specific commitment to implement a self-correction. However, under Q&A-5 of Notice 2023-43, a plan sponsor may self-correct an Eligible Inadvertent Participant Loan Failure that is insignificant, determined in accordance with the factors set forth in section 8.02 of Rev. Proc. 2021-30, even if the plan or plan sponsor is under examination, and even if the failure is discovered on examination. The new SCC for participant loan failures in section 7.3(c) accordingly allows self-correction of transactions currently described in section 7.3(a) and (b) of the VFC Program— i.e., loans the terms of which did not comply with plan provisions that incorporated requirements of section 72(p) of the Code concerning amount, duration, or level amortization, or loans that defaulted due to a failure to withhold loan repayments from the participant's wages—if such transactions are eligible for, and have been self-corrected under, the IRS's EPCRS. The new SCC in section 7.3(c) also extends to the failure to obtain spousal consent for a plan loan and to allowing a loan when the loan exceeds the number permitted under the terms of the plan, also provided that the transactions are eligible for, and have been self-corrected under, the IRS's EPCRS. IRS Notice 2023-43 (IRS Notice) provides interim guidance under section 305 of the SECURE 2.0 Act with respect to the expansion of EPCRS, including with respect to the expansion of self-correction for eligible inadvertent failures relating to loans from plans to participants under section 305(b)(1). 18 Among other things, the IRS Notice provides that plan sponsors may self-correct any eligible inadvertent failure relating to a loan from a plan to a participant that is corrected in accordance with section 6.07 of EPCRS, before EPCRS is formally updated pursuant to section 305(g) of the SECURE 2.0 Act, if certain conditions are satisfied. 19 The IRS Notice also provides that plan sponsors may rely on the notice beginning on the date it was issued, May 25, 2023, and ending on the date EPCRS is updated pursuant to section 305(g) of the SECURE 2.0 Act. Likewise, with respect to the new SCC in section 7.3(c), the Department will accept self-correction in accordance with section 6.07 of the IRS's EPCRS before EPCRS is formally updated. Once the IRS's EPCRS is formally updated, the Department will accept self-correction in accordance with the updated EPCRS. In this regard, with respect to a failure to obtain spousal consent for a plan loan, the Department's SCC will initially accept only a correction that involves obtaining spousal consent, unless and until additional correction methods are identified in an updated IRS's EPCRS. 20 The Department intends to monitor use of the SCC as well as any additional changes to the IRS's EPCRS to determine whether additional guidance appears necessary on the scope of the SCC in section 7.3(c) or on any correction methods. 18 Notice 2023-43, Guidance on Section 305 of the SECURE 2.0 Act of 2022 with Respect to Expansion of the Employee Plans Compliance Resolution System, available at https://www.irs.gov/pub/irs-drop/n-23-43.pdf. 19 Id. at Q&A 1. 20 See section 6.07(4) of Revenue Procedure 2021-30 (relating to correction of failure to obtain spousal consent for plan loan). The Department does not agree with the commenters who suggested that the Department should not impose any requirements in the VFC Program on parties who self-corrected participant loans beyond what is required by the IRS's EPCRS. Rather, similar to the Department's position described above with respect to self-correction of delinquent participant contributions and loan repayments, the Department believes self-correction of participant loan transactions is a new approach that merits a level of oversight to ensure that transactions are adequately corrected and that breaching fiduciaries have an appropriate level of accountability. Accordingly, under section 7.3(c), self-correctors are required to complete a SCC notice and submit the notice electronically to EBSA using the online VFC Program web tool located on EBSA's website. Self-correctors are also required to complete and retain the documents required under section 6.2 (including the Penalty of Perjury Statement). The SCC for participant loan transactions has been designed so that the burden of providing information to the Department is minimal and mirrors the IRS recordkeeping requirements 21 by requiring only contact information, a short description of type of participant loan failure, the loan amount or amounts in the case of multiple loans, the date the failure was identified, the date or dates of correction, the correction, and the number of participants affected by the correction. Unlike self-correctors under section 7.1(b), who must complete a SCC Record Retention Checklist, self-correctors under section 7.3(c) do not need to complete that checklist. 21 Notice 2023-43, at Q&A-11. The existing correction method under sections 7.3(a) and (b) are retained to permit those that would prefer to correct under the EPCRS VCP to utilize the application-based process under the VFC Program. The Department also does not agree with the suggestion that section 2 be amended to provide that EBSA will not initiate a civil investigation or assess civil penalties for a self-correction of a participant loan failure corrected under the IRS's EPCRS. Consistent with EBSA's historical practice under the VFC Program, the Department generally does not anticipate taking enforcement action in response to a compliant application or eligible self-correction except in the unusual situation where EBSA becomes aware of possible criminal behavior, material misrepresentations or omissions in the VFC Program application or SCC notice, or other abuse of the Program. 22 22 67 FR 15062, 15063 (2002). 3. Other Revisions to the VFC Program (a) Revisions to Application Process Provisions for Delinquent Participant Contributions—Sections 7.1(a), (c) and (d) Section 7.1(a) has been renamed “Delinquent Participant Contributions and Loan Repayments to Pension Plans under VFC Program Applications” to clarify that it applies only to corrections pursuant to Program applications in contrast to self-corrections under section 7.1(b). Additionally, section 7.1(a) has been revised to reflect the Department's amendment of its regulation defining plan assets in 2010 to include participant loan repayments within these regulatory principles. 23 Language has also been added to sections 7.1(a)(3)(ii)(A) and (iii)(A) to explain that the required narrative in the application must include a description of any steps taken to prevent future delinquencies. 23 See 29 CFR 2510.3-102(a)(1). Sections 7.1(b) “Delinquent Participant Contributions to Insured Welfare Plans” and (c) “Delinquent Participant Contributions to Welfare Plan Trusts” are re-designated as sections 7.1(c) and (d) respectively. A change also has been made to each of these sections to clarify that the participant contributions were remitted to the insurance provider in section 7.1(c)(3)(iii) and to the trust in section 7.1(d)(3)(ii) rather than the plan as previously stated to clarify the provision. The Department also had proposed deleting language regarding Restoration of Profits as a correction method under sections 7.1(a)(2)(i) and (ii) and 7.1(d)(2)(i) and (ii). The proposal was based on the view that this correction method may be unnecessary in this context, as applicants had not reported generating a profit through use of the delinquent amounts, and therefore, deletion would simplify the Program. Although the Department did not receive comments opposing these changes, the Department determined to retain Restoration of Profits as a potential correction method in the 2025 VFC Program in order to leave the option available should it become relevant to an applicant in the future. Many commenters on the 2022 VFC Program proposed revisions generally supported expansive availability of the Program to promote timely correction of errors. The 2022 VFC Program proposed revisions also clarified that the VFC Program does not include a correction for delinquent matching employer contributions. However, as explained in the notice, to the extent that a Program application provides that the employer will apply the same correction formula to the employer matching contributions that it is required to apply to delinquent participant contributions, EBSA does not expect to reject or refuse to process such applications merely because delinquent employer matching contributions are included even though the “correction” of the employer contribution is not a covered transaction under the VFC Program, is not entitled to any relief under the Program, and will not be covered by any no action letter. (b) Revisions to Application Process Provisions for Loans—Sections 7.2(b), (c) and (d) The 2022 VFC Program proposed revisions included several changes to section 7.2 related to the application process for correction of certain plan loans made at below-market interest rates. The Department received no comments on the proposed revisions, and as described below, is adopting the changes as proposed. The original VFC Program included as an eligible transaction “Loan at Below-Market Interest Rate to a Party in Interest with Respect to the Plan.” The corrective action in section 7.2(b) for such transactions requires the payment of the loan in full, plus penalties, and the greater of the Lost Earnings or Restoration of Profits. In addition to the required section 6.1 documentation, the 2006 VFC Program required applicants to provide both a written copy of an independent commercial lender's fair market interest rate determination under section 7.2(b)(3)(ii) and a copy of an independent fiduciary's dated, written approval of the fair market interest rate determination under section 7.2(b)(3)(iii). To reduce applicants' costs, the 2025 VFC Program revises section 7.2(b)(3)(iii) to eliminate the requirement that an independent fiduciary validate in writing the process used to determine the fair market interest rate determination for loans in the amount of $10,000 or less. The 2025 VFC Program also clarifies the wording in section 7.2(b)(3)(i) to require a narrative describing the process used to determine the interest rate at the time the loan was made. Section 7.2(c) “Loan at Below-Market Interest Rate to a Person Who is Not a Party in Interest With Respect to the Plan” is also a transaction that dates from the original VFC Program. Sections 7.2(c)(2)(i) and (ii) are being re-organized to clarify the required correction for this transaction. Section 7.2(c)(2)(ii) also adds an alternative to payment of the present value of the Principal Amounts from the Recovery Date to the loan's maturity date. The present value payment method must be coupled with the borrower's continued payment of the outstanding loan balance under the original repayment schedule for the duration of the loan. The new alternative permits the borrower's payment of the amortized outstanding loan balance over the remaining payment schedule of the loan at the interest rate that would have been applicable if the loan had originally been made at the fair market interest rate. When this new alternative is used, the applicant must submit a copy of the loan repayment schedule for the re-amortized loan repayments under section 7.2(c)(3)(iii). Any fair market interest rate must be determined by an independent commercial lender. The wording in section 7.2(c)(3)(i) is revised in a similar fashion to the wording in section 7.2(b)(3)(i) to require a narrative describing the process used to determine the interest rate at the time the loan was made. Section 7.2(d) “Loan at Below-Market Interest Rate Solely Due to a Delay in Perfecting the Plan's Security Interest” is another transaction dating back to the original VFC Program. It provides a correction for when a plan made a purportedly secured loan to a non-party in interest, but a delay occurred in recording or otherwise perfecting the plan's interest in the loan collateral, resulting in the loan being treated as an unsecured loan until the plan's security interest was perfected. Section 7.2(d)(2) is re-organized to clarify the correction. Section 7.2(d)(2)(ii) specifically requires that the plan's interest in the loan collateral be recorded or perfected. For situations where the delay in perfecting the loan's security caused a permanent change in the risk characteristics of the loan, section 7.2(d)(2)(iii) requires the payment of the present value of the remaining Principal Amounts from the date the loan is fully secured to the maturity date of the loan. The 2025 VFC Program clarifies that the present value payment method must be coupled with the borrower's continued payment of the outstanding loan balance under the original repayment schedule for the duration of the loan. Section 7.2(d)(2)(iii) is also being amended in the 2025 VFC Program to add an alternative that permits the borrower's payment of the amortized outstanding loan balance over the remaining payment schedule of the loan at the interest rate that would have been applicable for a loan with the changed risk characteristics. When this new alternative in the 2025 VFC Program is used, the applicant must submit a copy of the loan repayment schedule for the re-amortized loan repayments under section 7.2(d)(3)(iii). Any fair market interest rate must be determined by an independent commercial lender. In a related modification applicable to these three types of loans, section 5(a) is revised to include a specific explanation in section 5(a)(5) for when a commercial lender will be “independent” using the same criteria as is used to determine the “independence” of an appraiser. As an ongoing protection for plans and their participants, EBSA staff, as part of the application review process, will continue to monitor a commercial lender's interest rate determination process and will object if it appears that a lender is not truly “independent” of the plan's fiduciaries and parties in interest, or the interest rate determination process is otherwise flawed. (c) Revisions to Application Process Provisions for Purchases, Sales and Exchanges, Sales and Leasebacks—Section 7.4 The 2022 VFC Program proposed revisions included several changes to Section 7.4(a) “Purchase of an Asset (Including Real Property) by a Plan from a Party in Interest,” Section 7.4(b) “Sale of an Asset (Including Real Property) by a Plan to a Party in Interest,” and Section 7.4(c) “Sale and Leaseback of Real Property to Employer.” The Department did not receive any comments on the proposed revisions, and as described below, is adopting the changes as proposed. Section 7.4(a) provides a method of correction for situations when the plan purchased an asset (including real property) from a party in interest in a transaction to which no prohibited transaction exemption applies. A plan's purchase from a party in interest can be corrected under the VFC Program by reversing the transaction provided the plan receives the higher of the fair market value at resale or the Principal Amount plus the greater of either Lost Earnings or Restoration of Profits. 24 As an alternative correction, a plan may retain the asset plus receive an amount resulting from application of a formulaic calculation, but only if an independent fiduciary determines that the plan will realize a greater benefit from this alternative correction than from the resale of the asset. Section 7.4(a)(2) of the 2025 VFC Program includes a new paragraph (iii) that provides a third method of correction in situations when the purchase cannot be reversed or the asset retained because the plan no longer owns the asset ( e.g., sales, maturity, destruction). Under this new correction, the plan can receive a “cash settlement” if the asset has been sold and a Plan Official provides a statement, as required by section 7.4(a)(3)(v), that the sale was upon the advice of an independent fiduciary and not in anticipation of applying for relief under the Program. The determination of the cash settlement amount is prescribed in section 7.4(a)(2)(iii) and considers, among other factors, whether the plan realized a profit on the resale of the asset, or a loss on the resale, maturity or destruction of the asset. 24 The terms Principal Amount, Lost Earnings, and Restoration of Profits are defined in VFC Program section 5. As a further clarifying change, the wording in section 7.4(a)(2)(ii) is modified to permit the subtraction of any earnings received on the asset up to the Recovery Date from Lost Earnings. The 2025 VFC Program also includes an amendment to section 7.4(b) “Sale of an Asset (Including Real Property) by a Plan to a Party in Interest.” Section 7.4(b) provides a method of correction in situations when the plan sold an asset for cash to a party in interest in a transaction to which no prohibited transaction exemption applies. The amendment adds a condition to the section 7.4(b)(2)(ii) correction to permit the plan to receive the correction amount rather than to repurchase the asset by permitting a Plan Official to determine that the asset cannot be repurchased ( e.g., destruction, maturity). This new condition in section 7.4(b)(2)(ii) is an alternative to the section's existing condition requiring an independent fiduciary to determine that the plan will recognize a greater benefit from this correction than the correction in section 7.4(b)(2)(i). As part of the required documentation under section 7.4(b)(3)(iv), the Plan Official making this determination must provide a written explanation of why the asset cannot be repurchased. Section 7.4(c) “Sale and Leaseback of Real Property to Employer” provides a method of correction for a plan sponsor that sells a parcel of real property to the plan, which is then leased back to the plan sponsor and is not otherwise exempt. To more accurately reflect the statutory exemption provided by ERISA section 408(e), which does not limit the transaction to the plan sponsor, section 7.4(c) is being revised to explicitly allow correction of leases to affiliates of the plan sponsor. The final associated class exemption, PTE 2002-51, has been revised for consistency with this amendment. (d) Revisions to Application Process Provisions for Illiquid Assets—Section 7.4(f) The VFC Program includes correction for a transaction that permits a plan to divest, rather than continue to hold in its investment portfolio, a previously purchased asset that is determined to be illiquid and that had been acquired under circumstances described in the Program. The 2022 VFC Program proposed revisions retained those circumstances, as well as the correction method, which permits the sale of the asset to a party in interest provided the plan receives the higher of (A) the fair market value of the asset at the time of resale, without a reduction for the costs of sale; or (B) the Principal Amount, plus Lost Earnings as described in section 5(b). This correction encompasses a sale of the illiquid asset to a party in interest by the plan even if the original purchase of the asset by the plan was not a prohibited transaction or otherwise imprudent. However, the amendments modified the definition of Principal Amount to take into account the possibility that the transaction being corrected was neither a prohibited transaction nor a fiduciary breach. Section 7.4(f)(2)(ii) now defines Principal Amount as either the amount that would have been available had the Breach not occurred, or the plan's original purchase price if the original purchase was not a prohibited transaction or imprudent. The amendments also clarify that in the case of an illiquid asset that is a parcel of real estate, no party in interest may own real estate that is contiguous to the plan's parcel of real estate on the Recovery Date. There were no comments addressing these proposed revisions, and the 2025 VFC Program includes these changes as proposed. (e) Revisions to the VFC Program General Eligibility Criteria—Sections 3, 4, and 5 (i) Under Investigation Definition—Section 3(b)(3) To be eligible to correct under the VFC Program, a plan, applicant, or self-corrector may not be “Under Investigation” as defined in section 3(b)(3). The 2022 VFC Program proposed revisions included a modification to section 3(b)(3)(i) to state that a review by an EBSA Benefits Advisor is considered an investigation by EBSA that automatically makes an applicant or self-corrector ineligible to participate in the Program. However, the proposed change to section 3(b)(3) makes clear that a plan will not be considered to be Under Investigation merely because EBSA staff has contacted the plan, the applicant, the self-corrector, or the plan sponsor in connection with a participant complaint unless the participant complaint concerns the transaction described in the application or identified in the SCC notice and the plan has not received the correction amount due under the Program as of the date EBSA staff contacted the plan, the applicant, the self-corrector, or the plan sponsor. One commenter opposed including in the definition of Under Investigation contact from an EBSA staff member regarding a participant complaint arguing that the fiduciary may have not known the breach occurred until the fiduciary received the call from the EBSA staff member. The commenter further suggested that EBSA instead could put time parameters around when the fiduciary must act based on receiving information from the EBSA staff member. The VFC Program has limited eligibility for participation in the Program to plans and applicants that are not Under Investigation since its inception. The requirement does not turn on the fiduciary's knowledge of the breach (or allegations of a breach), but rather on the absence of an investigation by the Department. An important premise of the VFC Program is that fiduciaries should not wait to see if the agency has spotted the potential breach or if a participant has complained to the agency before they take action to correct violations. Instead, they should timely correct violations, and the VFC Program should be structured to avoid incentives for fiduciaries to adopt a “wait and see” approach focused on the likelihood of getting caught, instead of the need to correct violations promptly. Accordingly, the Department is not persuaded that the changes suggested by the commenter are consistent with the purpose of the provision and, accordingly, declines to adopt the suggestions. Rather, the 2025 VFC Program retains the definition of Under Investigation as proposed. (ii) Eligibility Exceptions—Section 4 Section 4 of the Program provides that in order to be eligible for the VFC Program, the plan, applicant, or self-corrector may not be Under Investigation (discussed above) and the VFC Program application must contain no evidence of potential criminal violations. The 2025 VFC Program added two new limited exceptions to the existing eligibility requirements to promote increase usage of the Program. The first exception involves the “potential criminal violations” provision in paragraph (b)(2) and allows participation in the VFC Program by an innocent plan administrator, plan sponsor, or applicant for cases involving delinquent participant contributions and loan repayments when (1) all funds have been repaid to the plan; (2) the appropriate law enforcement agency has been notified of the alleged criminal activity; and (3) the applicant submits a statement (covered by the Penalty of Perjury Statement) with the application providing contact information for the law enforcement agency, certifying that the applicant was not involved in the alleged criminal activity, and reporting whether a claim relating to the potential criminal violation has been made under an ERISA section 412 fidelity bond. To accommodate this change, section 4(b) is re-named and re-designated as section 4(b)(1), “In general.” EBSA always retains the right to reject any VFC Program application based on its review of the criminal activity involved. The second exception being added in the 2025 VFC Program is in section 4(d), which provides that an applicant is eligible to submit a “bulk application” when certain conditions are met. As noted in the 2022 VFC Program proposed revisions, over the past several years, EBSA has received Program applications from service providers to correct Breaches involving multiple plans. Some of these applications have involved hundreds, or even thousands, of plans, some of which are Under Investigation by EBSA. As noted elsewhere in this document, a plan is automatically ineligible to participate in the Program if it is considered “Under Investigation” as defined in section 3(b)(3) of the Program. Consequently, such plans could not be included in any resulting no action letter. EBSA noted that it would like to be able to issue a no action letter to the service provider that covers all plans named in the application in certain circumstances. EBSA received one comment letter in support of the changes described in the 2022 VFC Program proposed revisions, and the Program's eligibility provision have been expanded as proposed. Specifically, to qualify: (1) the application must cover at least ten named plans and each plan must have participated in the transaction being corrected; (2) the applicant must be a service provider that is applying for relief only on its own behalf; (3) the applicant is currently or was providing services to each of the named plans at the time of the transaction being corrected; and (4) the service provider cannot be Under Investigation by EBSA and the corrective action cannot have been taken as a result of an EBSA investigation or review of any named plan. EBSA retains the right to determine whether the corrective action was taken as a result of any investigation, and to exclude any plan involved in the investigation from the no action letter. Also, section 6.1(d)(3) is being amended to permit a bulk applicant to provide for each named plan either the Annual Report Form 5500 filing information or the plan sponsor's nine-digit number (EIN). This procedural change will avoid undue delay while a service provider attempts to secure Annual Report Form 5500 filing information, which may not be directly related to the Breach. Section 6.1(g) is also being amended to permit a bulk applicant with knowledge of the transaction that is the subject of the application to sign and date the Penalty of Perjury Statement in which the applicant certifies that it is not Under Investigation by EBSA instead of requiring a signature from a plan fiduciary for each plan covered by the application. (iii) Lost Earnings De Minimis Exception—Section 5(e) The 2006 VFC Program provides a de minimis exception that applies to corrective distributions of less than $20 each to former employees, their beneficiaries, and alternate payees who neither have account balances with nor have a right to future benefits from the plan if the applicant demonstrates that the cost of making a distribution to the individual exceeds the amount of the corrective payment. In that case, the distribution does not have to be paid to the individuals but rather the total amount can be paid to the plan. The 2022 VFC Program proposed revisions included an increase in the de minimis amount to $35. Several commenters asked for a de minimis rule for Lost Earnings on delinquent remittance of participant contributions and participant loan repayments under which the correction would be limited to payment of the principal amount and there would not be an obligation to pay Lost Earnings to the participants or to the plan. The suggestion was not to be limited to former employees, their beneficiaries, and alternate payees who neither have account balances with nor have a right to future benefits from the plan. Some commenters argued that the costs of processing the corrective Lost Earnings payments should be avoided when the per participant amount is very small while other commenters proposed a total amount threshold of $50 or $75 on a per event basis before correction would have to include Lost Earnings. The Department is not persuaded that the de minimis amount should be increased above the $35 amount in the proposal or that it should be expanded to include individuals with account balances or a right to future benefits from the plan. Rather, in the Department's view, a de minimis level for the VFC Program should reinforce, not undercut, the overarching obligation that plan sponsors and other Plan Officials who fail to follow the legal requirements (such as for depositing participant contributions and loan repayments) should make full correction to the plan and its participants and beneficiaries. Accordingly, the 2025 VFC Program retains the requirements in section 5(e) with the increase from $20 to $35. (f) Payment of Correction and Correction Costs by Plan Officials Although section 7 of the VFC Program provides that any Plan Official may correct a breach in accordance with section 5 and the applicable correction method, section 7.1(a) through (d) provides that any penalties, late fees or other charges must be paid by the employer. Several commenters suggested that the VFC Program expressly allow service providers, as well as employers, to pay Lost Earnings on delinquent remittance of participant contributions and loan repayments. The commenters argued that in certain circumstances when the amount of the delinquent participant contributions and loan repayments are small, the cost incurred by service providers to collect Lost Earnings from a plan sponsor or employer can exceed the amount of Lost Earnings. EBSA has decided to adopt this suggestion by modifying section 7.1(a) through (d) to better conform with section 5(b) by stating that the cost of the correction must be paid by a Plan Official and not from the employee contributions and loan repayments. This change is consistent with existing section 5(c) of the VFC Program which provides that the responsible fiduciary, plan sponsor or other Plan Official must pay correction amounts and any costs of correction and also prohibits payment of any part of the correction amount or costs of correction from plan assets. Plan Official is defined in section 3(b)(2) as a plan fiduciary, plan sponsor, party in interest with respect to a plan, or other person who is in a position to correct a breach by filing an application or submitting a SCC notice. Although the service providers may pay Lost Earnings amounts resulting from another Plan Official's breach, a proper VFC Program application or SCC notice, which includes the penalty of perjury statement by a plan fiduciary, must be completed or EBSA will not issue a no action letter or self-correction acknowledgment. In the 2022 VFC Program proposed revisions, the Department also stated that, with respect to a multiemployer plan or multiple employer plan, both the plan administrator and any contributing or adopting employer would be permitted to use the amended VFC Program and the SCC. 25 The Department explained that the plan administrator of such a plan could apply on behalf of the entire plan and any participating employer may apply on its own behalf. Although no comments were received on that aspect of the 2022 proposal, to provide additional clarity, the Department made a change in this 2025 VFC Program to permit an employer in a multiemployer plan or multiple employer plan who wishes to correct on its own behalf to sign the application or SCC penalty of perjury statement and, regardless of the employer's status as a plan fiduciary, the penalty of perjury statement need not be signed by another plan fiduciary. See sections 6.1 and 6.2. 25 See 87 FR 71165 (citing the preamble to the 2006 VFC Program, 71 FR 20262, 20264 (April 19, 2006)). An employer would be considered a Plan Official for purposes of the Program. (g) Miscellaneous Modifications—Sections 5 and 7 The 2025 VFC Program includes assorted other clarifying changes that were in the November 2022 notice designed to update the Program, assist Program users, and maintain consistency among provisions. For example, section 5(d) “Distributions” is revised to reflect the cessation of both the IRS and Social Security Administration letter forwarding services for missing participants, and to provide a reference to the Missing Participants—Best Practices for Pension Plans guidance issued by the Department. 26 Another example is sections 7.3(a)(3) and (b)(3). Those sections provide that only certain supporting documentation must be provided with the application. The words “unless otherwise requested by EBSA” have been added to confirm that EBSA may, in individual cases, request copies of other supporting documentation. Similarly, references to self-corrector, self-correction, and the SCC notice have been added to various provisions where appropriate. Additionally, in sections 7.4(d) and (e) dealing with transactions at greater and less than fair market value respectively, the documentation requirement for the qualified, independent appraiser's report has been revised to correctly specify value rather than fair market value at the time of the transaction. In section 7.5 (“Benefits”) concerning the distribution of overvalued plan assets in a defined contribution plan, the correction specifically requires the restoration to the plan of the amount that exceeded the paid distribution amount to which all affected participants were entitled under the terms of the plan, plus Lost Earnings as described in section 5(b) on the overpaid distributions. 27 26 Available at www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/retirement/missing-participants-guidance. 27 The preamble to the 2022 VFC Program proposed updates noted that, although a copy of the fidelity bond was originally required to be included with an application, the 2002 Program was modified to instead permit applicants to include information concerning the plan's ERISA fidelity bond, and this informational requirement was eliminated in the 2006 Program. Although the informational requirement was not proposed to be added back to the Program, the preamble to the 2022 proposed revisions emphasized that the prior modifications focused merely on streamlining the application process and should not be misconstrued as eliminating or modifying the ERISA section 412 bonding requirements that protect plans against loss by reason of acts of fraud or dishonesty. For information on the ERISA section 412 bonding requirements, see FAB 2008-04, (Nov. 25, 2008); 29 CFR 2550.412-1 (1975) and Part 2580 (1985). 4. Decisions on Requests for Comment on Further Expansion of VFC Program The preamble to the 2022 VFC Program proposed updates included a solicitation of public comments on potential further expansion or revision of the Program in four specific areas: (i) missing and nonresponsive participants and beneficiaries, (ii) integration of the VFC Program with corrections under the IRS's EPCRS, (iii) adoption of a pre-audit compliance program, and (iv) electronic VFC Program submissions. Commenters were generally supportive of further changes to the VFC Program in these areas. With respect to revising the program to either permit or require that VFC Program applications be submitted electronically, the Department intends to continue to evaluate alternative approaches to e-submission, e.g., email versus an internet or web-based portal, but has decided to continue the current process under which the EBSA Regional Offices that administer the VFC Program application process can make available email boxes that can be used for e-submission of VFC Program applications and supporting documents. Text was added to the VFC Program to encourage applicants to contact the relevant Regional Office about email submission options and format requirements, e.g., penalty of perjury statements. However, with respect to missing and nonresponsive participants and beneficiaries and the other two areas identified for potential expansion, the Department believes they all involve important fiduciary compliance issues and central aspects of the Program that require careful development of issues and options. For example, with respect to revising the Program to extend to Breaches in connection with missing and nonresponsive participants and beneficiaries, the Department may consider ways to incorporate, as corrective action, the provision of information to the Department for its Retirement Savings Lost and Found searchable database described in ERISA section 523. While the Department has not included these areas of expansion in the 2025 VFC Program, it will consider these issues further and may propose expansion of the Program in these areas in a separate project. C. Regulatory Impact Analysis The following is a discussion of the examination of the effects of this regulatory action as required by Executive Order 12866, 28 Executive Order 13563, 29 the Paperwork Reduction Act of 1995, 30 the Regulatory Flexibility Act, 31 section 202 of the Unfunded Mandates Reform Act of 1995, 32 Executive Order 13132, 33 and the Congressional Review Act. 34 28 Regulatory Planning and Review, 58 FR 51735 (Oct. 4, 1993). 29 Improving Regulation and Regulatory Review, 76 FR 3821 (Jan. 18, 2011). 30 44 U.S.C. 3506(c)(2)(A) (1995). 31 5 U.S.C. 601 et seq. (1980). 32 2 U.S.C. 1501 et seq. (1995). 33 Federalism, 64 FR 153 (Aug. 4, 1999). 34 5 U.S.C. 804(2) (1996). 1. Executive Orders 12866 and 13563 Executive Orders 12866 (as amended by 14094) and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing and streamlining rules, and of promoting flexibility. Under Executive Order 12866, “significant” regulatory actions are subject to the requirements of the executive order and review by the Office of Management and Budget (OMB). As amended by Executive Order 14094, section 3(f) of Executive Order 12866 defines a “significant regulatory action” as any regulatory action that is likely to result in a rule that may: (1) have an annual effect on the economy of $200 million or more (adjusted every three years by the Administrator of the Office of Information and Regulatory Affairs (OIRA) for changes in gross domestic product); or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, Territorial, or Tribal governments or communities; (2) create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; (3) materially alter the budgetary impacts of entitlement grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) raise legal or policy issues for which centralized review would meaningfully further the President's priorities or the principles set forth in the Executive order, as specifically authorized in a timely manner by the Administrator of OIRA in each case. For this purpose, a “rule” includes “an agency statement of general applicability and future effect . . . that is designed to implement, interpret, or prescribe . . . policy or to describe the procedure or practice requirements of an agency.” OMB has determined that this action is significant under section 3(f) Accordingly, OMB has reviewed this action, and the Department has assessed the costs and benefits of its amended enforcement policy and related PTE proposal. The VFC Program is designed to provide an efficient, cost-effective method for Plan Officials to correct a variety of ERISA fiduciary breaches and prohibited transactions and receive Departmental recognition of the correction. Specifically, the amendments to the Program add a SCC 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 to the Program add a SCC for certain participant loan failures self-corrected under the IRS's EPCRS. The Department expects that the amendments to the VFC Program will increase efficiency and accessibility for potential applicants and self-correctors. These changes, described further below, include in part, a new SCC for delinquent participant contributions and loan repayments involving Lost Earnings less than or equal to $1,000, acceptance of bulk applications with modified requirements, and increased flexibility in the procedures for a variety of other transactions. These changes also include elimination from the exemption of a three-year limitation for VFC Program applicants that take advantage of the relief provided by the VFC Program and the exemption for a similar type of transaction. (a) Affected Entities All pension and welfare plans can utilize the VFC Program if they have a fiduciary breach for which there is an eligible transaction. Parties that are covered by section 4975 of the Code can rely on the related class exemption for excise tax relief for transactions identified in the exemption that are corrected under the VFC Program. In 2021 there were 718,736 defined contribution plans and 46,388 defined benefit plans that would be impacted by these changes. 35 In 2022 there were an estimated 2,790,000 health plans 36 and 630,000 other welfare benefit plans that would also be impacted by these changes. 37 35 Employee Benefits Security Administration, Private Pension Plan Bulletin: Abstract of 2021 Form 5500 Annual Reports, (September 2023). 36 U.S. Department of Labor, EBSA calculations using the 2022 Medical Expenditure Panel Survey, Insurance Component (MEPS-IC), and 2020 Census County Business Patterns. 37 U.S. Department of Labor, EBSA calculations using non-health welfare plan Form 5500 filings and projecting non-filers using estimates based on the non-filing health universe. An average of 1,226 applicants per year used the VFC Program from 2021 to 2023. The Department estimates that the 73 percent of VFC Program applicants will move to the SCC. 38 The Department also estimates a one percent increase in the number of self-corrections, or 909 self-corrections, 39 resulting from the removal of the three-year limitation provision for self-correctors. 38 The Department estimates that the SCC will streamline the process for the 73 percent of small and large VFC Program applicants involving Lost Earnings less than or equal to $1,000. 39 1,226 applicants × 73.4% × 1.01 = 909 self-corrections. The Department also projects that changes to the VFC Program will result in two new Program users filing bulk applications and 326 Program users filing non-bulk applications. 40 Please see Table 1 for the number of plans that will utilize the VFC Program and exemption. 40 1,226 applicants × (100% minus 74.3%) = 326 non-bulk applicants. Table 1—Number of Plans That Will Utilize the VFC Program and Exemption Number of plans Filing Bulk Applications 2 Filing Non-Bulk Applications 326 SCC 909 Total 1,237 (b) Benefits and Costs The Department believes that the benefits of the amended VFC Program and related PTE justify its costs. Because participation is voluntary, the VFC Program imposes no costs unless Plan Officials choose to avail themselves of the opportunity to correct a potential fiduciary breach under the terms of the VFC Program. Plans are expected to only utilize the program if the benefits of using the program exceed the costs. The Department expects that the revised VFC Program will be easier and more useful for potential applicants. The greater efficiency and accessibility that will result from the availability of a SCC for delinquent participant contributions, and other expansions and clarifying modifications of the Program, are expected to make the Program easier to use, to lessen the cost of participation in many instances, and to increase efficiency for both applicants and reviewers. The VFC Program provides incentives for fiduciaries to correct a potential fiduciary breach. Benefits for Plan Officials who are granted relief under the VFC Program include elimination of risks arising from an otherwise uncorrected fiduciary breach, as well as savings of resources that otherwise might have been needed to defend against a civil action by the Department based on the breach. The VFC Program has been very successful to date in encouraging and facilitating the correction of violations. The changes to the VFC Program will allow Plan Officials to obtain the benefits of the program at a reduced cost. The Department hopes that this cost reduction may encourage other Plan Officials to correct previously undetected and unreported fiduciary breaches and reimburse plan losses, which would enhance the retirement income security of participants and beneficiaries; however, it has no data to reliably predict the extent of the increased usage. The Department will continue to actively monitor the use of the VFC Program and evaluate its benefits and costs. The Department is unable to predict with certainty either the reduction in application costs that will arise from the revisions to the Program, or the potential increase in participation that will be associated with these revisions. One commenter requested the Department collect additional data from the VFCP applications to assess the VFC Program and SCC. The commenter suggested collecting data on the characteristics of the corrections and plans utilizing the program, including the amount of correction, the types of transactions corrected, the size of retirement plans, the date of the prohibited transaction, and the date by which participant contributions or loan repayments were supposed to be remitted to the plan. The commenter also suggested to conduct follow-up surveys or interviews with plans that use the VFC program. While this data could be beneficial, the Department seeks to minimize administrative costs. An additional and significant benefit of the VFC Program accrues to participants and beneficiaries through the correction of fiduciary breaches and the restoration to the plan of amounts representing losses or improperly generated profits arising from impermissible transactions, resulting in greater security of plan assets and future benefits. Encouraging greater participation in the VFC Program by lowering the costs of using it could help reduce the need for plan participants to pursue legal action. These changes to the VFC Program will reduce associated costs by reducing the number of hours required to make corrections and file applications. Compared with the existing VFC Program, the Department expects the amended Program's per-user costs to be lower because the amendments could move 73 percent of the expected VFC Program applications to the SCC. 41 Moreover, implementing the SCC will reduce the recordkeeping and reporting cost for Plan Officials with small amounts of delinquent participant contributions and loan repayments, because they no longer will have to submit an application to the Department with extensive supporting documentation, but instead will merely submit a self-correction notice with minimal data to the Department and provide corroborating documentation to the plan administrator. 41 The Department estimates that the SCC will streamline the process for 73 percent of small and large VFC cases involving Lost Earnings less than or equal to $1,000. This SCC also provides additional flexibility and potentially increase use to Plan Officials by eliminating the three-year limitation in the PTE. Please see Table 2 for estimates and cost savings for VFC Program applicants. The estimates presented in Column A are obtained using similar assumptions and methods as in Column B. The estimates presented in Column B are based on the estimates presented in Table 7. Table 2—Cost Savings for VFC Program Applicants From Program and Exemption Changes Cost before program and exemption changes Cost after program and exemption changes Cost savings (A) (B) (A−B) Traditional VFC Program (annual) $765,570 $215,876 $549,693 SCC (annual) 355,910 −355,910 VFCP Exemption (annual) 120,236 120,236 0 Total (annual) 885,806 692,023 193,784 Plans or their service providers will need to familiarize themselves with the changes to the VFC Program and amendments to the PTE. Service providers may help multiple plans in a year or across years, so while it could take a service provider multiple hours to review the amended requirements, the actual burden impact on an individual plan would be less. The Department assumes that it will take two hours per plan to review the changes and fill out the VFCP application. Please see Table 3 for calculations and burden totals. Table 3—Hour Burden for Rule Familiarization Number of entities Number of hours per entity Total hour burden Hourly wage Dollar equivalent of hour burden (A) (B) (A × B) (C) (A × B × C) Compensation and benefits managers familiarize with the changes to the VFC Program and Exemption (first year) 1,237 2 2,474 $124.75 $308,632 Total 1,237 2,474 308,632 Overall, the Department estimates that the costs of the VFC Program and the associated class exemption, in their amended forms, would total approximately $690,798 ($669,600 in annual equivalent costs reflecting the monetized cost of the work performed by in-house personnel and outside service providers and $21,198 in annual cost burden reflecting the cost of materials and postage). Over 10 years, the costs associated with the VFC Program and associated class exemption would total approximately $7.5 million, annualized to $1 million per year (using a 7 percent discount rate). 42 42 Over 10 years, the costs associated with the VFCP Program and associated class exemption would total approximately $8.8 million, annualized to $1 million per year (using a 3 percent discount rate). 2. Paperwork Reduction Act In accordance with the Paperwork Reduction Act of 1995 (PRA 95) ( 44 U.S.C. 350(c))(2)(A) ), the Department solicited comments concerning the information collection request (ICR) included in the 2022 VFC Program proposed revisions. At the same time, the Department also submitted the ICR to OMB, in accordance with 44 U.S.C. 3507(d). The Department received a comment that specifically addressed the paperwork burden analysis of the information collection requirements contained in the 2022 VFC Program proposed revisions. The commenter attempted to adjust the labor wage rates; however, the Department has already accounted for inflation in the labor rates. The changes made by these final rules affect the existing OMB control number, 1210-0118. A copy of the ICR for OMB Control Number 1210-0118 may be obtained by contacting the PRA addressee listed in the following sentence or at www.RegInfo.gov. For additional information contact, U.S. Department of Labor, Employee Benefits Security Administration, Office of Research and Analysis, Attention: PRA Officer, 200 Constitution Avenue NW, Room N-5718, Washington, DC 20210; or send to ebsa.opr@dol.gov. The amended VFC Program, described above, includes a SCC for delinquent participant contributions and loan repayments to pension plans involving Lost Earnings less than or equal to $1,000, streamlined requirements for bulk applications, and it expands and modifies transactions that are currently eligible for the VFC Program. The SCC permits applicants to self-correct, and then provide EBSA with a notice of the self-correction through the online VFC Program web tool. Service providers are able to submit bulk applications to the VFC Program, under the existing terms and requirements of the Program, with some easing of the eligibility and information requirements. Under the new bulk applicant provisions, the bulk applicant will receive a no action letter providing relief only to the service provider correcting transactions involving each of the plans named in the application. An average of 1,226 applicants per year used the VFC Program from 2021 to 2023. The Department estimates that the 73 percent of VFC Program applicants will move to the SCC. 43 Please see Table 1 for the number of plans that will utilize the VFC Program and associated class exemption PTE 2002-51. 43 The Department estimates that the Self-Correction Component will streamline the process for the 73 percent of small and large VFC Program applicants involving Lost Earnings less than or equal to $1,000. In addition to the VFC Program, the Department is publishing a final amendment to the associated class exemption PTE 2002-51, which applies only to qualifying applicants and self-correctors participating in the VFC Program. The exemption is currently unavailable to VFC Program applicants that have, within the previous three years, taken advantage of the relief provided by the VFC Program and the exemption for a similar type of transaction. The three-year provision was initially included in the exemption to prevent parties from becoming lax in complying with fiduciary and other ERISA duties because of the availability of the exemption. Based on the Department's experience with the VFC Program and the exemption, the Department concluded that the risk of such behavior is low and therefore is eliminating the three-year limitation. The overall paperwork burden for the amended VFC Program and the amended PTE 2002-51 is provided below. VFC Program For the VFC Program, the Department estimates that Plan Officials will devote 2.5 hours of clerical staff gathering paperwork, one hour of a compensation and benefits manager calculating Lost Earnings, and one hour of clerical staff engaging in recordkeeping activities for each non-bulk application or self-correction. The Department estimates that for each bulk application, Plan Officials will devote 25 hours of clerical staff gathering paperwork, 10 hours of a compensation and benefits manager calculating Lost Earnings, and 10 hours of clerical staff engaging in recordkeeping activities. Please see Table 4 for calculations and burden totals. Table 4—Hour Burden of VFC Program Number of entities Number of hours per entity Total hour burden Wage rate Dollar equivalent of hour burden (A) (B) (A × B) (C) (A × B × C) Traditional VFC Program Compensation and benefits managers calculate Lost Earnings (non-bulk) 326 1 326 $140.32 $45,744 Clerical staff gather information (non-bulk) 326 2.5 815 65.99 53,782 Clerical staff maintain recordkeeping (non-bulk) 326 1 326 65.99 21,513 Compensation and benefits managers calculate Lost Earnings (bulk) 2 10 20 140.32 2,806 Clerical staff gather information (bulk) 2 25 50 65.99 3,300 Clerical staff maintain recordkeeping (bulk) 2 10 20 65.99 1,320 SCC Compensation and benefits managers calculate Lost Earnings 909 1 909 140.32 127,551 Clerical staff gather information 909 2.5 2,273 65.99 149,962 Clerical staff maintain recordkeeping 909 1 909 65.99 59,985 Total 1,237 5,648 465,963 The Department estimates that external service providers will spend about 10 minutes completing and submitting the online SCC notice, 20 hours completing and submitting bulk applications, and two hours completing and submitting all other applications. 44 The mailing cost per application is approximately $10. 45 Please see Table 5 for calculations and burden totals. 44 It should be noted that the required checklist for applications filed with the Department under the Program appears twice within the Appendices to the Program. While it is required to be submitted only once, it is included as the separate Appendix B for applicants who do not choose to use the model application in Appendix E, and separately as the final item in the model application for ease of use for those who do choose to use the model application. 45 United States Postal Service, Priority Mail, (2024), https://www.usps.com/ship/priority-mail.htm. Table 5—Hour and Cost Burden of Service Providers for VFC Program Number of entities Number of hours per entity Total hour burden Wage rate Dollar equivalent of hour burden Mailing cost per entity Cost burden (A) (B) (A × B) (C) (A × B × C) (D) (A × D) Service providers prepare information (non-bulk) 326 2 652 $121.53 $79,238 $10.10 $3,293 Service providers prepare information (bulk) 2 20 40 121.53 4,861 10.10 20 Service providers maintain recordkeeping for SCC 909 0.17 152 121.53 18,412 Total 1,237 844 102,511 3,313 VFCP Class Exemption (PTE 2002-51) The Department estimates that all self-correctors and VFC Program applicants will use the amended class exemption. The Department has determined that service providers will prepare the documentation required by the exemption which will require approximately one hour for completion and delivery. VFC Program applicants are required to send notices to their participants and beneficiaries. The mailing cost per notice is $0.78. 46 Please see Table 6 for calculations and burden totals. 46 The mailing cost is calculated in the following manner: (1 page × $0.73 for postage + $0.05 for material costs) = $0.78. Table 6—Hour and Cost Burden of VFCP Exemption Number of entities Number of hours per entity Total hour burden Wage rate Dollar equivalent of hour burden Mailing cost per entity Cost burden (A) (B) (A × B) (C) (A × B × C) (D) (A × D) Service providers prepare information 389 1 389 $121.53 $47,235 Participants receiving notices for exemption through mail, prepared by service providers 24,500 0.03 817 65.99 53,892 $0.78 $19,110 Total 24,889 1,205 101,126 19,110 Summary Please see Table 7 for the total annual hour and cost burden for the information collection arising from the VFC Program and the exemption. Table 7—Total Annual Hour and Cost Burden Total hour burden Total dollar equivalent of hour burden Total cost burden Total cost (A) (B) (C) (B + C) VFC Program 6,491 $568,473 $3,313 $571,786 VFCP Exemption 1,205 101,126 19,110 120,236 Total 7,696 669,600 22,423 692,023 In summary, the categories in the table below encompass the numbers for both the VFC Program and the amended class exemption: Type of Review: Revision of currently approved collection of information. Agency: Department of Labor, Employee Benefits Security Administration. Title: Voluntary Fiduciary Correction Program. OMB Number: 1210-0118. Affected Public: Individuals or households; Business or other for-profit; Not-for-profit institutions. Respondents: 1,237. Frequency of Response: On occasion. Responses: 59,991. Estimated Total Burden Hours: 7,696. Total Annual Cost (Operating and Maintenance): $22,423. 3. Regulatory Flexibility Analysis The Regulatory Flexibility Act (RFA) 47 imposes certain requirements with respect to Federal rules that are subject to the notice and comment requirements of section 553(b) of the Administrative Procedure Act, or any other law, and are likely to have a significant economic impact on a substantial number of small entities. 48 Unless the head of an agency certifies that a final rule will not have a significant economic impact on a substantial number of small entities, section 604 49 of the RFA requires the agency to present a final regulatory flexibility analysis of these final rules. 47 5 U.S.C. 601 et seq. (1980). 48 5 U.S.C. 551 et seq. (1946). 49 5 U.S.C. 604 (1980). This document describes an enforcement policy of the Department that is not being issued as a general notice of final rulemaking. Therefore, the RFA does not apply. However, the Department is also issuing a final amendment to a class exemption (PTE 2002-51) to which the Regulatory Flexibility Act does apply. The Department certifies that the amendments to PTE 2002-51 will not have a significant economic impact on a substantial number of small entities. However, EBSA considered the potential costs and benefits of this action for small pension plans and the Plan Officials in developing the final amendment to the class exemption and believes that its greater simplicity and accessibility would make the Program more useful to small employers who wish to avail themselves of the relief offered under the exemption. Below is the factual basis for the certification. As mentioned previously, all pension and welfare plans can utilize the VFC Program with the related PTE if they have a fiduciary breach for which there is an eligible transaction. In 2021 there were 630,423 small defined contribution plans and 39,673 small defined benefit plans and plan officials that would be impacted by these changes. 50 In 2022 there were 2,710,128 small health plans that would also be impacted by these changes. 51 Currently 1,226 plan fiduciaries make use of the VFC Program in a given year and the Department projects a small increase to 1,237 fiduciaries making use of the VFC Program in a given year. 52 Please see Table 1 for the number of plans that will utilize the VFC Program and exemption. 50 Employee Benefits Security Administration, Private Pension Plan Bulletin: Abstract of 2021 Form 5500 Annual Reports, (September 2023). 51 U.S. Department of Labor, EBSA calculations using the 2022 Medical Expenditure Panel Survey, Insurance Component (MEPS-IC), and 2020 Census County Business Patterns. 52 As discussed earlier in this regulatory impact analysis, the Department estimates a one percent increase in the number of self-corrections, or 909 self-corrections, resulting from the removal of the three-year limitation provision for self-correctors. Additionally, the Department also projects that changes to the VFC Program will result in two new Program users filing bulk applications and 326 Program users filing non-bulk applications. Thus, the number of fiduciaries making use of the VFC Program in a given year is calculated in the following manner: 909 self-corrections + 326 non-bulk applications + 2 bulk applications = 1,237. The Department is amending the related PTE so that excise tax relief will be available for transactions that are corrected under the SCC. The Department is also amending the PTE to eliminate the three-year limitation. Thus, all plans eligible to use the VFC Program would be eligible to use the PTE more than just once every three years. However, the Department estimates that, of the total number of pension and welfare plans significantly less than one percent will use the PTE in a given year. 53 53 In 2021, there were 765,124 pension plans. ( Source: Employee Benefits Security Administration, Private Pension Plan Bulletin: Abstract of 2021 Form 5500 Annual Reports, (September 2023).) In 2022, there were 630,000 welfare benefit plans. ( Source: U.S. Department of Labor, EBSA calculations using non-health welfare plan Form 5500 filings and projecting non-filers using estimates based on the non-filing health universe.) Thus, 0.08% of all pension and welfare plans will use the PTE in a given year. (909 plans/(765,124 plans + 630,000 welfare benefit plans) = 0.07 percent.) The final amended PTE provides excise tax relief for self-correctors if they pay the amount of the excise tax owed to the plan. The SCC can only be used in situations where the size of Lost Earnings is $1,000 or less. Code section 4975(a) imposes an excise tax on each prohibited transaction equal to 15 percent of the amount involved with respect to the prohibited transaction for each year (or part thereof) in the taxable period. Therefore, the maximum excise tax owed for each year would generally not exceed $150. 54 54 Under Reorganization Plan No. 4 of 1978, supra n. 1, the Secretary of the Treasury retains interpretive authority over Code sections 4975(a) and (b). Plans or their service providers will need to familiarize themselves with the amendments to the PTE. Service providers can help multiple plans in a year or across years, so, although it could take a service provider multiple hours to review the amended requirements, the actual burden impact on an individual plan would be less. The Department estimates that all self-correctors will use the new provisions of the amended class exemption. The per-plan cost for rule familiarization would be $140. 55 55 With an hourly rate for the in-house compensation and benefits manager of $140.32 per hour and one hour of burden allocated to a plan, the burden be plan would be $140 (rounded). For plans with the maximum Lost Earnings of $1,000 and an excise tax of 15 percent the maximum excise tax in each year would generally not exceed $150. Including the cost of rule familiarization of $140, the total expense could be $290 in a year. Based on the foregoing, the Department hereby certifies that these final amendments will not have a significant economic impact on a substantial number of small entities. Therefore, the Department has not prepared a Final Regulatory Flexibility Analysis. 4. Unfunded Mandates Reform Act For purposes of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4), as well as Executive Order 12875, this action does not include any Federal mandate that may result in expenditures by State, local, or Tribal governments in the aggregate of more than $100 million, adjusted for inflation, or increase expenditures by the private sector of more than $100 million, adjusted for inflation. 5. Federalism Statement Executive Order 13132 (August 4, 1999) outlines fundamental principles of federalism and requires the adherence to specific criteria by Federal agencies in the process of their formulation and implementation of policies that have “substantial direct effects” on the States, the relationship between the national government and States, or on the distribution of power and responsibilities among the various levels of government. Federal agencies promulgating regulations that have federalism implications must consult with State and local officials and describe the extent of their consultation and the nature of the concerns of State and local officials. This action does not have federalism implications because it has no substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. Section 514 of ERISA provides, with certain exceptions specifically enumerated, that the provisions of titles I and IV of ERISA supersede any and all laws of the States as they relate to any employee benefit plan covered under ERISA. The amendments of the VFC Program in this document do not alter the fundamental provisions of the statute with respect to employee benefit plans, and as such would have no implications for the States or the relationship or distribution of power between the national government and the States. 6. Congressional Review Act The VFC Program is subject to the Congressional Review Act provisions of the Small Business Regulatory Enforcement Fairness Act of 1996 (5 U.S.C. 801 et seq. ) and will be transmitted to the Congress and the Comptroller General for review. OIRA has determined that The Program does not meet the criteria set forth in 5 U.S.C. 803(2) under the Act. The Program is not a “major rule” as that term is defined in 5 U.S.C. 804. Authority: Authority: Secretary of Labor's Order 1-2011, 77 FR 1088 (January 9, 2012). 29 U.S.C. 1132(a)(2) and (a)(5), 1136(b). Voluntary Fiduciary Correction Program Section 1. Purpose and Overview of the VFC Program Section 2. Effect of the VFC Program Section 3. Definitions Section 4. VFC Program Eligibility Section 5. General Rules for Acceptable Corrections (a) Fair Market Determinations (b) Correction Amount (c) Costs of Correction (d) Distributions (e) De Minimis Exception Section 6. VFC Program Application and Self-Correction Component Procedures 6.1 VFC Program Application Procedures 6.2 VFC Program Self-Correction Component Procedures Section 7. Description of Eligible Transactions and Corrections Under the VFC Program 7.1 Delinquent Remittance of Participant Funds (a) Delinquent Participant Contributions and Loan Repayments to Pension Plans Under VFC Program Applications (b) Delinquent Participant Contributions and Loan Repayments to Pension Plans Under the Self-Correction Component (c) Delinquent Participant Contributions to Insured Welfare Plans (d) Delinquent Participant Contributions to Welfare Plan Trusts 7.2 Loans (a) Loan at Fair Market Interest Rate to a Party in Interest With Respect to the Plan (b) Loan at Below-Market Interest Rate to a Party in Interest With Respect to the Plan (c) Loan at Below-Market Interest Rate to a Person Who Is Not a Party in Interest With Respect to the Plan (d) Loan at Below-Market Interest Rate Solely Due to a Delay in Perfecting the Plan's Security Interest 7.3 Participant Loans (a) Loans Failing To Comply With Plan Provisions for Amount, Duration, or Level Amortization Under VFC Program Applications (b) Default Loans Under VFC Program Applications (c) Eligible Inadvertent Participant Loan Failures Under the Self-Correction Component 7.4 Purchases, Sales and Exchanges (a) Purchase of an Asset (Including Real Property) by a Plan From a Party in Interest (b) Sale of an Asset (Including Real Property) by a Plan to a Party in Interest (c) Sale and Leaseback of Real Property to Employer (d) Purchase of an Asset (Including Real Property) by a Plan From a Person Who Is Not a Party in Interest With Respect to the Plan at a Price More Than Fair Market Value (e) Sale of an Asset (Including Real Property) by a Plan to a Person Who Is Not a Party in Interest With Respect to the Plan at a Price Less Than Fair Market Value (f) Holding of an Illiquid Asset Previously Purchased by a Plan 7.5 Benefits (a) Payment of Benefits Without Properly Valuing Plan Assets on Which Payment Is Based 7.6 Plan Expenses (a) Duplicative, Excessive, or Unnecessary Compensation Paid by a Plan (b) Expenses Improperly Paid by a Plan (c) Payment of Dual Compensation to a Plan Fiduciary Appendix A. Sample VFC Program No Action Letter Appendix B. VFC Program Application Checklist (Required) Appendix C. List of EBSA Regional Offices Appendix D. Lost Earnings Example Appendix E. Model Application Form (Optional) Appendix F. SCC Retention Record Checklist (Required) Section 1. Purpose and Overview of the VFC Program The purpose of the Voluntary Fiduciary Correction Program (VFC Program or Program), including its Self-Correction Component (SCC), is to protect the financial security of workers by encouraging identification and correction of transactions that violate or may violate Part 4 of Title I of the Employee Retirement Income Security Act of 1974, as amended (ERISA). Part 4 of Title I of ERISA sets out the responsibilities of employee benefit plan fiduciaries. Section 409 of ERISA provides that a fiduciary who breaches any of these responsibilities shall be personally liable to make good to the plan any losses to the plan resulting from each breach and to restore to the plan any profits the fiduciary made through the use of the plan's assets. Section 405 of ERISA provides that a fiduciary may be liable, under certain circumstances, for a breach of fiduciary responsibility by a co-fiduciary. In addition, under certain circumstances, there may be liability for knowing participation in a fiduciary breach. In order to assist all affected persons in understanding the requirements of ERISA and meeting their legal responsibilities, the Employee Benefits Security Administration (EBSA) is providing guidance on what constitutes adequate correction under Title I of ERISA for the Breaches described in this Program. Section 2. Effect of the VFC Program (a)(1) Effect of a no action letter. EBSA generally will issue to the applicant a no action letter 56 with respect to a Breach identified in the Program application if the eligibility requirements of section 4 are satisfied and a Plan Official corrects a Breach, as defined in section 3, in accordance with the requirements of sections 5, 6 and 7. Pursuant to the no action letter it issues, EBSA will not initiate a civil investigation under Title I of ERISA regarding the applicant's responsibility for any transaction described in the no action letter, or assess civil penalties under either section 502(l) or 502(i) of ERISA on the correction amount paid to the plan or its participants. 56 See appendix A. (2) Effect of correction under the Self-Correction Component. EBSA will not issue a no action letter to a self-corrector under the Program's SCC. A self-corrector will receive an acknowledgment and summary of the SCC notice submission by email. If the self-corrector satisfies the eligibility requirements of section 4 and corrects a Breach, as defined in section 3, in accordance with the requirements of sections 5, 6 and 7, EBSA will not initiate a civil investigation under Title I of ERISA regarding the self-corrector's responsibility for the Breach identified in the SCC notice or assess civil penalties under section 502(l) or 502(i) of ERISA on the correction amount paid to the plan or its participants. (b) Verification. EBSA reserves the right to conduct an investigation at any time to determine (1) the truthfulness and completeness of the factual statements set forth in the Program application or the SCC notice and (2) that the corrective action was, in fact, taken. (c) Limits on the effect of a no action letter under the VFC Program. (1) In general. Any no action letter issued under the VFC Program is limited to the Breach and applicants identified therein. Moreover, the method of calculating the correction amount described in this Program is only intended to correct the specific Breach described in the application. Methods of calculating losses other than, or in addition to, those set forth in the [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2025-00327. Public record. Not legal advice.