EBSA final rule: Limited self-correction now allowed for retirement plan errors

The Employee Benefits Security Administration has released its final rule amending and restating the Voluntary Fiduciary Correction Program. This program permits eligible employer-sponsored pension and welfare benefit plans and plan fiduciaries to correct certain prohibited transactions without U.S. Department of Labor civil enforcement actions and civil penalties.

Among other changes:

• The final rule adds a limited self-correction component (SCC) for certain failures to timely transmit participant contributions (and participant loan repayments) to employer-sponsored retirement plans.
• It also implements Section 305(b)(2) and (3) of the SECURE 2.0 Act by adding a self-correction feature for certain participant loan failures that are self-corrected under the Employee Plans Compliance Resolution System published by the Internal Revenue Service.
• Amendments to Public Transaction Exemption 2002-51 allow eligible plans to take advantage of relief provided by the program and PTE 2002-51 more than once every three years.

Previously, the program did not include any formal SCC or provide fiduciary relief with respect to any self-corrections. However, under the new SCC, the Employee Benefits Security Administration now allows employers and plan officials to self-correct two types of transactions in certain limited circumstances:

• Delinquent participant contributions and loan repayments to employer-sponsored retirement plans remitted to the plan within 180 days of the date the delinquent contributions were withheld from payroll or received by the employer (provided the corresponding lost earnings total $1,000 or less) and
• Eligible inadvertent participant loan failures.

Related: Navigating SECURE 2.0 confusion: collaboration between SMBs and third-party administrators