How-to Guide for Using the DOL’s New Self-Correction Program

Imagine correcting a common employee benefit plan error, like a late contribution, with a simple online form, instead of a months-long formal application.

The regulatory framework for employee benefit plans is changing, and for fiduciaries, this is a welcome development. The Department of Labor (DOL) has updated its Voluntary Fiduciary Correction Program (VFCP) for the first time in nearly two decades, adding a new “self-correction” component. This is not just a procedural change, it is a fundamental shift that provides a more efficient path to compliance for employee benefit plans. 

This article will explain the new self-correction rules, show why they are a game-changer for your organization, and provide practical insights to turn a once-daunting process into a streamlined solution. The full explanation of changes, effective March 17, 2025 can be found on the federal register briefing.

Previous VFCP Process

Under the former standards outlined by the DOL’s Employee Benefits Security Administration (EBSA), fiduciaries were required to submit an application to the DOL to obtain relief. After the application was received, fiduciaries were issued a no-action Letter from the DOL that confirmed that no enforcement actions would be taken against the plan provider.

Two areas that frequently require corrective action are delinquent participant contributions and minor participant loan failures. While small in amount, failure to correctly identify and report these errors can lead to civil investigation, potentially large civil penalties, and excise taxes.

The DOL’s primary focus in the 2025 changes was to simplify the process for minor errors in order to focus greater resources on more significant violations. With over 700 closed civil investigations in 2024, the DOL is prioritizing cases that can result in greater recoveries for plans. Creating a collaborative compliance environment benefits both plan sponsors and governmental entities seeking to increase efficiency of enforcement.

New Components of Self-Correction

The new program standards simplify compliance through reducing paperwork for self-correction. The first area that administrators can self-correct is delinquent contributions. The second is delinquent participant loan repayments for the purpose of repaying a plan loan. 

Contributions that have been retained beyond the time regulated by the DOL at 29 CFR 2510.3-102 are the most common type of transaction that will be corrected under the new VFCP. 

The new self-correction component (SCC) has a few requirements that must be met in order to comply:

• Plan and plan sponsors must not be under DOL investigation
• Providers must calculate lost earnings on late-remitted contributions using the DOL online calculator 
• Calculated lost earnings must not exceed $1,000 less any excise tax
• Contributions are remitted to the plan within 180 days from the date of withholding 

Given all requirements are met, the DOL requires notification through the new SCC notice tool. After submission of the SCC, expect an automatic email acknowledging the correction. This notification provides protection from civil enforcement from the DOL. 

Streamlined compliance can help providers navigate complex situations like deposit errors discovered in newly acquired subsidiaries.

Strategic Benefits for Your Plan

The new SCC is an innovative step by the DOL to quick-fix an area of correction before it becomes a significant compliance risk for providers. Using the new program, employers can examine the underlying risks that cause needs for small corrections. Rather than getting bogged down in the previous application process, your resources can free up to enhance procedures that strengthen efficiency in the corrected areas. 

An additional feature of the new improvements to the VFCP is providing excise tax relief for certain transactions, provided that all requirements of the VFCP are met. The six transactions are as follows:

• Failure to timely remit contributions or participant loans
• Loans made at fair market interest rates to a disqualified person
• Purchases and sales of asset to a disqualified person
• Purchases and sales of illiquid assets by plans
• Using plan assets to pay settlor expenses to service providers
• Sale of property to a plan and leaseback of property at fair market rental value

Further explanation can be found at the federal register prohibited transaction exemption.

How Johnson Lambert Can Help

The DOL’s 2025 VFCP changes mark a new era for proactive compliance. By introducing the SCC, the DOL has given employee benefit plan administrators a powerful tool to address common fiduciary errors. This change offers more than administrative relief. It provides an opportunity to build a more robust and resilient benefit plan governance structure. By understanding these new rules and preparing your organization to use them, you can move from a reactive mindset to a proactive, confident approach to fiduciary responsibility.

Compliance with regulatory matters can be daunting. Johnson Lambert understands the unique challenges of employee benefit plans. Our experience gives us a clear perspective on how these changes can be leveraged to your advantage, to keep you focused on things that matter the most. Please contact Johnson Lambert if you have questions or interested in how we can support your employee benefit plan needs.