DOL correction and compliance programs.

• Author: Cooney, Eileen M.
• Position: Department of Labor

In an effort to assist employers, plan officials, service providers and others in complying with the fiduciary responsibility, reporting and disclosure requirements of the Employee Retirement Income Security Act of 1974 (ERISA), the Department of Labor (DOL) adopted two employee benefit plan correction programs--the Voluntary Fiduciary Correction Program (VFCP) and the Delinquent Filer Voluntary Compliance Program (DFVCP). This item explains the rules and eligibility requirements for filing under each program, as well as outlining the benefits of taking advantage of these initiatives.

VFCP

On March 15, 2000, the Pension and Welfare Benefits Administration (PWBA) established the VFCP on an interim basis. The program became permanent on April 29, 2002. It is intended to benefit workers by (1) encouraging the voluntary and timely correction of possible fiduciary breaches, (2) encouraging the full correction of certain breaches of fiduciary responsibility and (3) restoring to participants and beneficiaries losses resulting from fiduciary breaches. Under VFCP, certain persons can avoid potential ERISA civil actions and the assessment of civil penalties from DOL investigations or civil actions; see 67 Fed. Reg. 15062-15083.

Essentially, any employee benefit plan sponsor, official and parties-in-interest may voluntarily apply for relief from liability for ERISA fiduciary violations. However, the sponsor must fully and accurately correct violations; incomplete or unacceptable applications may be rejected.

Correction method: Violations can be fully and correctly resolved as follows:

1. Identify any violations and determine whether they are included on the VFCP's list of 15 transactions;

2. Follow the process for correcting the specific violations provided for each transaction listed;

3. Calculate and restore any losses to the plan (with interest) and distribute any incorrect supplemental benefits to participants; and

4. File an application with the Employee Benefits Security Administration (EBSA) (the successor to the PWBA) that includes documentation showing evidence of corrected financial transactions.

   The effect of the VFCP is that the EBSA will generally issue a no-action letter to the applicant for a breach identified in the application.

   Transactions types: The 15 transactions reduce to five different categories--delinquent participant contributions; loans; purchases; sales and exchanges; and benefits and plan expenses.

   Delinquent participant...