DOL’s New Self-Correction Rules for Late Plan Contributions

The Department of Labor (DOL) has released a new tool for benefit plan sponsors dealing with late retirement plan contributions. Under ERISA, employers must transfer these amounts to the plan as soon as they can reasonably be segregated from general assets. Even short delays can create compliance issues, and for years the only formal path to correct them was through the Voluntary Fiduciary Correction Program (VFCP). To mitigate that issue, the DOL has introduced a new Self-Correction Component (SCC) to the VFCP. The update gives plan sponsors a faster way to correct small, isolated delays without filing a full application. To help clients, prospects, and others, JLK Rosenberger has summarized the key details below.

Overview of the New Self-Correction Option

For years, plan sponsors reported that the VFCP review process slowed routine corrections. A full filing requires detailed payroll records, deposit reports, and a formal calculation of lost earnings. Sponsors must then wait for a no-action letter before closing the issue.

The new self-correction option allows plan sponsors to correct certain late participant contributions and loan repayments on their own if they meet the stated criteria. The new option does not replace VFCP.  Instead, it offers a way to streamline corrections that are minor in scope and can be quickly resolved. The goal is to reduce administrative burden while still protecting plan participants.

Eligibility Rules for Self-Correction

How can plan sponsors take advantage of the new self-correction option? Eligibility states:

• The sponsor must deposit the late amounts within 180 days. The 180-day period starts when the contribution or loan repayment is withheld from pay or received by the employer.
• Lost earnings must not exceed $1,000. Sponsors must use the DOL’s online calculator. If lost earnings rise above the threshold, the full VFCP still applies.
• No agency may have an investigation underway. The plan and plan sponsor must be free of any active DOL or IRS investigation at the time of correction.
• All amounts must be corrected before filing the notice. Sponsors must deposit both the delinquent amounts and the calculated lost earnings before submitting the SCC notice.

How the Self-Correction Process Works

The new procedure is simpler than a traditional VFCP filing, but plan sponsors still need to follow appropriate steps and retain all documentation. First, the sponsor needs to identify the late contribution or repayment and deposit the delinquent amount as soon as possible. Lost earnings are determined using the DOL’s calculator; then, that amount must be deposited into the plan immediately. Once the correction is complete, the sponsor needs to submit an SCC Notice through the DOL’s system. Finally, the DOL issues an email confirming receipt of the SCC notice. This should be kept as the sponsor’s evidence that the correction was made using the approved self-correction process. Sponsors must retain the supporting documents outlined in the DOL’s checklist, including deposit confirmations, payroll reports, and lost-earnings calculations.

Limitations of the Self-Correction Component

The SCC applies only in limited circumstances. Sponsors cannot rely on the option when lost earnings exceed $1,000 or when the 180-day deadline has passed. The DOL also bars its use for repeated or systemic late deposits, even when each instance on its own would meet the threshold.

In those cases, the traditional VFCP is still required. The full program also continues to serve sponsors seeking excise-tax relief or dealing with delays involving larger dollar amounts or longer time periods.

Implications for Plan Sponsors

The self-correction option gives plan sponsors a faster way to clean up minor delays, but it doesn’t lessen their core responsibilities under ERISA. Deposits still need to be made on time, and the SCC should function as a backstop, not as the standard way to handle contributions. Key considerations for sponsors include:

• Monitor payroll and deposits proactively to spot delays early and keep corrections within the 180-day window.
• Use SCC only for isolated mistakes, not recurring issues that may point to larger gaps.
• Maintain internal controls that outline responsibilities, reconciliations, and escalation steps; conduct ongoing training for employees.
• Coordinate with payroll providers and third-party administrators on VFCP, including the new self-correction program.

We’re Here to Help

The DOL’s Self-Correction Component improves efficiency in correcting minor late deposits. When used appropriately, it can reduce paperwork and shorten the correction process. If you have questions about the information outlined above or need assistance with your next retirement plan audit, JLK Rosenberger can help. For additional information, call 949-860-9902 or click here to contact us. We look forward to speaking with you soon.