Despite diligence, achieving error-free compliance with regulations for company sponsored retirement plans can be tough. Mistakes and oversights do happen, and proactively addressing them is best practice. Updates made by the Employee Benefits Security Administration (EBSA) to the Voluntary Fiduciary Correction Program are now live, making it easier to self-correct common compliance issues.
Failure To Deposit Contributions ASAP?
According to EBSA, failure to deposit participant contributions to the plan “as soon as they reasonably can be segregated from the company’s general assets” is among the most frequent errors made by employer sponsored retirement plans. Though plan sponsors typically rely on third party administrators, it remains essential to monitor how and when the company payroll system and retirement plan service providers ensure “participant contributions are forwarded to the plan on the earliest possible date in compliance with the law.” Failure to deposit participant contributions on time is a serious mistake, but, as Plan Sponsor reports, self-correction is facilitated via the newly streamlined Voluntary Fiduciary Correction Program:
Updates to the Voluntary Fiduciary Correction Program—providing employers and plan administrators with more efficient ways to voluntarily correct compliance issues in retirement, health and other employee benefit plans—went into effect earlier this week. The 2025 update, which became effective on March 17, adds a self-correction tool that allows employers and plan officials to fix delays in sending participant contributions, such as employee payroll deductions and participant loan repayments to retirement plans….The VFCP is designed to encourage correction of fiduciary breaches and compliance with the law by allowing plan sponsors to avoid potential DOL civil enforcement actions and civil penalties by voluntarily correcting eligible transactions in a manner that meets the requirements of the program. Employers and plan officials can use the self-correction component to voluntarily self-correct delinquent participant contributions and loan repayments to retirement plans of any size if lost earnings total $1,000 or less.
When making a correction, the VFCP Model Application Form EBSA has provided is not mandatory, but submissions should include the same information detailed in the model. The Department of Labor offers this overview of the Voluntary Fiduciary Correction Program:
The Voluntary Fiduciary Correction Program (VFCP) is a voluntary enforcement program that allows plan officials to identify and fully correct certain transactions such as prohibited purchases, sales, and exchanges; improper loans; delinquent participant contributions; and improper plan expenses. The program includes 19 specific transactions and their acceptable means of correction, eligibility requirements, and application procedures. If an eligible party documents the acceptable correction of a specified transaction, EBSA will issue a no-action letter.
Although the VFCP enables retirement plan sponsors to seek relief from enforcement actions associated with common ERISA fiduciary violations, once a plan is under investigation by the Department of Labor, applying to the VFCP to fix errors is no longer an option. This DOL Fact Sheet lists the types of transactions eligible for voluntary correction. At Plan Sponsor, Remy Samuels points out that the updated approach to voluntary corrections offers these improvements to the prior protocols:
- Expands the scope of transactions eligible for correction;
- Clarifies transactions already eligible for correction;
- Simplifies administrative and procedural requirements; and
- Amends the Voluntary Fiduciary Correction Program class exemption so plan officials can avoid the imposition of excise taxes.
An Easy Error To Fix?
Another common error made by plan sponsors is failure to obtain or renew the ERISA Bond. At Rosenbaum Law firm, Ary Rosenbaum reminds us that retirement plan sponsors must maintain ERISA Bond compliance, and cautions: “Make sure the ERISA bond is correct Every retirement plan subject to ERISA requires that every fiduciary of the plan be bonded. Except for two exceptions, the fidelity bond must be at no less than 10% of plan assets with a minimum of $1,000 and a maximum of $500,000. Plans that don’t have a fidelity bond in place or don’t have enough coverage are supposed to note that on Form 5500 and that alone could be a trigger for an audit by the government by the IRS or Department of Labor.”
Colonial Surety Company, a leading, national and Treasury-listed bond writer, makes ERISA Fidelity Bond compliance fast and easy. Even better for plan sponsors? You can affordably add on Fiduciary Liability Insurance to protect yourself, since the ERISA Bond protects the plan. Everything plan sponsors need to be compliant and protected is a few clicks away:
- Just Log In, then: get a quote, pay, and download your proof of ERISA Bond.
- Choose Multi-year options: Lock in rates and avoid future compliance hassles.
- Add on Fidelity Liability Insurance to safeguard against personal liability: for a few dollars a day, you’ll be covered with defense costs and penalty limits up to $1,000,000, if faced with alleged or actual breaches of duty in connection with the employee retirement plan.
- Obtain Cyber liability coverage–it’s included at no extra cost, providing additional protection–for the plan and your company–against regulatory actions related to data and privacy, as well as expert response services.
ERISA Bond+Liability Insurance HERE
Need help? Our knowledgeable, New Jersey based ERISA service team is available directly, Monday-Friday, 8:30am-5:30pm EST at 888-383-3313 and via email: erisadept@colonialsurety.com.
Serving customers since 1930, Colonial Surety is the trusted source for the pension industry to secure legally required ERISA bonds, fiduciary liability insurance and cyber-liability insurance. We help safeguard plan sponsors, pension professionals and financial advisors — and keep their businesses compliant — with pain-free, efficient, and friendly service every time. Colonial Surety Company is rated “A Excellent” by A.M. Best Company, US Treasury listed and in business all across the country.
.