Never miss a story — sign up for PLANSPONSOR newsletters to keep up on the latest retirement plan benefits news.
Ask the Experts June 18, 2024
What Are the Differences Between Different Plan Correction Programs?
Experts from Groom Law Group and CAPTRUST answer questions concerning retirement plan administration and regulations.
Reported by PS
Q: What is the difference between a VFCP and a VCP filing?
Kimberly Boberg, Kelly Geloneck, Emily Gerard and David Levine, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:
A: These two types of filings, while similarly named, are two very different types of filings; plan sponsors and service providers often confuse the two.
A Voluntary Fiduciary Correction Program filing (“VFCP”), is a filing with the Department of Labor that is typically used by ERISA plan sponsors. The filing is used primarily to correct late remittances of elective deferrals and/or loan repayments but can also be used to correct other types of prohibited transactions and fiduciary violations, such as improper payment of expenses by the plan, certain parties-in-interest transactions, and certain loan errors. At the present time, most defects may not be self-corrected under VFCP, though there is a proposed amendment which would establish additional self-correction features in the future. If the filing is successful, the filer will receive a no-action letter indicating that the Department of Labor will not seek enforcement or civil penalties under Title I of ERISA in connection with the identified violation.
The Voluntary Correction Program (“VCP”) is one of three programs that is part of the IRS’ overall correction system for plan errors known as the Employee Plans Compliance Resolution System (“EPCRS”). Though EPCRS allows for self-correction of certain plan errors without a submission to the IRS, which is known as the Self-Correction Program (“SCP”), VCP is a program where a formal submission to the IRS is required. A properly executed VCP submission can prevent a retirement plan from losing its tax-favored status due to certain plan errors. A VCP is generally used for plan errors that are not eligible for SCP but can also be used by sponsors who prefer written IRS approval, even to correct failures that are SCP-eligible, and there is also some tax-relief under VCP that is not available under SCP.
NOTE: This feature is to provide general information only, does not constitute legal advice and cannot be used or substituted for legal or tax advice.
Do YOU have a question for the Experts? If so, we would love to hear from you! Simply forward your question to Amy.Resnick@issgovernance.com with Subject: Ask the Experts, and the Experts will do their best to answer your question in a future column.