DOL: More time to comment on agency's new 401(k) self-correction program
In the wake of SECURE 2.0, the Department of Labor has extended the public comment period for the Voluntary Fiduciary Correction Program that allows fiduciaries to self-correct late participant contributions.
The Department of Labor announced Monday that it is reopening the comment period on its Voluntary Fiduciary Correction Program and the proposed amendment to the associated class Prohibited Transaction Exemption 2002-15.
In reopening the comment period in the Federal Register for an additional 60 days, Labor officials said they want to know the impact that SECURE 2.0—enacted after the initial request for comment was published—will have on the correction program.
“Reopening the comment period will allow the Employee Benefits Security Administration to obtain important public input on implementing the changes mandated by Congress in the SECURE 2.0 Act of 2022 that impact the department’s Voluntary Fiduciary Correction Program,” said Assistant Secretary for Employee Benefits Security Lisa Gomez.
SECURE 2.0 was included in the omnibus appropriations measure enacted at the end of the 117th Congress. The appropriations measure included several provisions affecting retirement plans.
Related: The DOL’s 2023 regulatory agenda: New rules for 401(k)s and group health plans
The current voluntary program encourages plans to follow ERISA and the IRS code by self-correcting violations of the law. If plans correct eligible transactions and meet the other requirements, the exemption allows the plans to avoid civil enforcement actions and penalties. It was first adopted in 2002 and then was revised in 2005 and 2006.
The Biden Administration said that based on its review of the program, changes would facilitate more efficient corrections of fiduciary breaches and encourage greater participation in the program.
As a result, on Nov. 21, 2022, EBSA solicited comments on program updates that included a self-correction component that employers who fail to send employee salary withholding contributions or participant loan repayments to retirement plans in a timely fashion. Comments on that proposal were due on Jan. 20, 2023.
The appropriations measure containing SECURE 2.0 was passed by Congress on Dec. 23—in the middle of the comment period. President Biden signed the legislation on Dec. 29.
In including SECURE 2.0 in the measure, Congress made large and small changes to retirement programs. For instance, the law changed the definition of “eligible inadvertent failure.”
According to the regulations.gov website, 11 comments were submitted by the Jan. 20 deadline.
The department is seeking general comments about the impact that SECURE 2.0 will have on the program and is asking stakeholders specific questions about sections of the law. For instance, the department would like comments on a deeming provision in the law.
Comments are due on or before April 17.