Plan Corrections Necessary? DOL Corrections Program

Valuable Information on 401ks, Pensions, ESOPs, Form 5500 Preparation + More

If your company offers an employee benefit plan that is subject to the Employee Retirement Income Security Act (“ERISA”), for example a 401(k) plan, it is important to remember that your Company is responsible for ensuring that the Plan and any plan transactions comply with the fiduciary standards ERISA has created. Even though a Plan can implement thorough internal controls and oversight into the plan operations, inadvertent mistakes and errors still happen. These mistakes and errors can cause a Plan significant taxes and liabilities if uncorrected. Below is a summary of the Department of Labor’s (“DOL”) correction programs:

  • Delinquent Filer Voluntary Compliance Program (“DFVCP”) – This program allows for Plans to file delinquent IRS Form 5500s with reduced penalties. This program cannot be used if the Plan and/or Plan Sponsor have been notified by the DOL of non-filings. The program includes two-steps. The first step is to file the delinquent Form 5500, ensuring to select filing under the DFVC program on the first page of the Form 5500. The second step is to pay the penalty and fees for filing under the DFVCP.
  • Voluntary Fiduciary Correction Program (VFCP) – This program allows for Plans to correct certain violations before the DOL investigates or notifies the plan, and if no criminal violations are present. If approved by the DOL, the Plan will receive a “No-Action” letter that provides relief from the excise tax. Some transactions that are eligible for correction are delinquent participant contributions and loan repayments, loan amounts or duration in excess of Plan limits, and excessive or unnecessary compensation paid by the Plan.

If you have come across a plan error that needs to be corrected, reach out to your Plan auditor, third-party administrator or ERISA attorney for further guidance on which of the above correction programs is necessary for your Plan.

By Kevin C. Bach, CPA, CVA