A Better Way to Comply: Inside DOL’s New Self-Correction Program

Andrea Wright, CPA Partner, Johnson Lambert LLP
Trends in Accounting, Auditing, and Consulting

The regulatory framework for employee benefit plans is changing, and for fiduciaries, it’s a welcome development.

Imagine correcting a common employee benefit plan error, like a late contribution, with a simple online form instead of a months-long formal application. Thankfully, we no longer have to imagine.

For the first time in nearly two decades, the U.S. Department of Labor (DOL) updated its Voluntary Fiduciary Correction Program (VFCP), adding a new “self-correction” component. This isn’t just a procedural change—it’s a fundamental shift that provides a more efficient path to compliance for employee benefit plans.

Previous VFCP Process

Under the former standards, fiduciaries were required to submit an application to the DOL to obtain relief. After the application was received, fiduciaries were then issued a “no-action” letter to confirm 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 these errors don’t necessarily involve large sums of money, failure to correctly identify and report them 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 these types of 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. This creates a collaborative compliance environment that benefits both plan sponsors and governmental entities seeking to increase enforcement efficiency.

New Components of Self-Correction

The new program standards simplify compliance by reducing paperwork for self-correction. Under the new standards, administrators can self-correct delinquent contributions and delinquent participant loan repayments.

Contributions retained beyond the time regulated by the DOL (29 CFR 2510.3-102) are the most common type of transaction that’ll be corrected under the new VFCP. To comply with the new self-correction component (SCC), the following requirements must be met:

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

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

Overall, this streamlined compliance process can help providers navigate complex situations like deposit errors discovered in newly acquired subsidiaries. The chart below helps illustrate the improved process.

Strategic Benefits for Your Plan

The new SCC is an innovative step to quickly fix an area of correction before it becomes a significant compliance risk. Using the new program, employers can examine the underlying compliance risks that require small corrections. Rather than getting bogged down like in the previous application process, your resources can be freed up to enhance procedures that strengthen efficiency in the corrected areas.

Additionally, the new process provides excise tax relief for certain transactions, provided that all requirements are met. Such transactions include:

• Failure to timely remit contributions or participant loans.
• Loans made at fair market interest rates to a disqualified person.
• Purchases and sales of assets 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.

The new VFCP went into effect on March 17, 2025. A full explanation of changes, including prohibited transaction exemptions, can be found in the Federal Register briefing.

No doubt, these changes clearly mark a new era for proactive compliance, giving employee benefit plan administrators a powerful tool to address common fiduciary errors. The changes offer more than administrative relief—they provide 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.

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