Sorry I’m Late: New Guidance on Late Contributions
Sorry I’m Late: New Guidance on Late Contributions
Twenty (20!) years after it last issued guidance, the DOL’s Employee Benefits Security Administration has finally released an updated Voluntary Fiduciary Correction Program (VFCP). VFCP is a program that permits retirement plan fiduciaries to correct certain fiduciary breaches, such as penalties that are imposed for late remittance of participant contributions, without being subject to civil enforcement penalties. Notable changes to VFCP include:
To use SCC, the amount of the lost earnings owed to the plan cannot exceed $1000, including applicable excise taxes. Also, employers must remit the delinquent contributions to the plan within 180 calendar days from the date the amounts were withheld from pay.
An ongoing concern for plan sponsors is the requirement to notify plan participants of the late remittances if using VFCP to correct. This new guidance provides that if plan sponsors use SCC, they are not required to notify participants if they otherwise pay any applicable excise taxes. Since the excise taxes are often de minimis, the ability to obtain DOL acknowledgement for a correction through SCC may render the Voluntary Fiduciary Correction Program more appealing to plan sponsors than it has been in the past.
For questions or advice on how the new VFCP guidance will apply to your plan, please contact a member of your MoFo employee benefits team.
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