Employee Benefit Plans: The 411

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

Voluntary fiduciary correction program

employee benefit plan, fiduciary, 401k

Throughout the administration of 401k plans, employers may at times run into fiduciary violations under the Employee Retirement Income Security Act (“ERISA”). If this happens, you may be eligible to apply for voluntary relief from enforcement actions, including assessments of civil monetary penalties through the Voluntary Fiduciary Correction Program (“VFCP”). The VFCP was designed to encourage employers to voluntarily comply with ERISA by self-correcting certain violations of the law. There are currently 19 categories of violations covered by the VFCP:

  • Delinquent Participant Contributions and Participant Loan Repayments to Pension Plans
  • Delinquent Participant Contributions to Insured Welfare Plans
  • Delinquent Participant Contributions to Welfare Plan Trusts
  • Fair Market Interest Rate Loans to Parties in Interest
  • Below Market Interest Rate Loans to Parties in Interest
  • Below Market Interest Rate Loans to Non-Parties in Interest
  • Below Market Interest Rate Loans Due to Delay in Perfecting Security Interest
  • Participant Loans Failing to Comply with Plan Provisions for Amount, Duration or Level Amortization
  • Defaulted Participant Loans
  • Purchase of Assets by Plans from Parties in Interest
  • Sale of Assets by Plans to Parties in Interest
  • Sale and Leaseback of Property to Sponsoring Employers
  • Purchase of Assets from Non-Parties in Interest at More Than Fair Market Value
  • Sale of Assets to Non-Parties in Interest at Less Than Fair Market Value
  • Holding of an Illiquid Asset Previously Purchased by Plan
  • Benefit Payments Based on Improper Valuation of Plan Assets
  • Payment of Duplicate, Excessive or Unnecessary Compensation
  • Improper Payment of Expenses by Plan
  • Payment of Dual Compensation to Plan Fiduciaries

The VFCP includes an online calculator to assist applicants by automatically calculating the correction amounts that must be paid to the plan. If you wanted to self-correct one of the violations above through the VFCP, you would need to provide supporting documentation to the appropriate regional office of EBSA. Applicants must restore to the plan, participants, and beneficiaries to the condition they would have been in had the breach not occurred. If you would like more information about the program, VFCP applicants may contact the appropriate EBSA regional office and request the VFCP coordinator.

Ryan G. Wojdacz, CPA