"Reopening the comment period will allow the Employee Benefits Security Administration to obtain important public input on implementing the changes mandated by Congress in the SECURE 2.0 Act of 2022 that impact the department's Voluntary Fiduciary Correction Program," Lisa M. Gomez, assistant secretary for employee benefits security, said in a news release.
The comment period will be reopened 60 days following the announcement's publication in the Federal Register on Tuesday. The initial comment period concluded Jan. 20.
The VFCP allows plan sponsors to avoid potential civil enforcement actions and civil penalties under ERISA if they voluntarily correct eligible transactions in a manner that meets the program's requirements.
SECURE 2.0 includes a provision that requires the VFCP to cover certain violations related to participant loans if self-corrected violations align with the IRS' Employee Plans Compliance Resolution System. Specifically, the provision provides for correction of an "eligible inadvertent failure" relating to a loan from a plan to a participant, and furthermore indicates that the Labor Department treat any such loan failures as self-corrected in accordance with applicable requirements as meeting the requirements of the VFCP, although the department may impose reporting or other procedural requirements, according to the Labor Department.
In reopening the comment period, the Labor Department said it is interested in comments on what revisions, if any, should be made to the VFCP to reflect the treatment of corrections of loans described in SECURE 2.0.
The Labor Department is proposing to expand the VFCP because while the program is designed to encourage employers to voluntarily comply with ERISA by self-correcting certain violations, employers currently have to fill out an application, provide documentation and wait for EBSA approval in order to rectify a delinquent participant contribution.
The proposal would allow employers to instead notify EBSA electronically that they have self-corrected certain failures to send participant contributions and loan repayments to retirement plans on time, so long as certain conditions are met, including that the delinquent participant contributions or loan repayments must be remitted to the plan no more than 180 calendar days from the date of withholding or receipt.
Since the program went live in 2002, the Labor Department's Employee Benefits Security Administration has processed about 27,500 applications and restored $762 million to plans, including fielding 1,374 applications and restoring $5 million in fiscal year 2022, Ms. Gomez said in a November call with reporters.