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[Federal Register Volume 90, Number 9 (Wednesday, January 15, 2025)]
[Rules and Regulations]
[Pages 3667-3673]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-00328]

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DEPARTMENT OF LABOR

Employee Benefits Security Administration

29 CFR Part 2550

[Application No. D-11799]
RIN 1210-ZA23

Prohibited Transaction Exemption (PTE) 2002-51 To Permit Certain 
Transactions Identified in the Voluntary Fiduciary Correction Program

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Exemption amendment.

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SUMMARY: This document amends Prohibited Transaction Exemption 2002-51, 
an exemption for certain transactions identified in the Department of 
Labor's Voluntary Fiduciary Correction Program (VFC Program or 
Program). The VFC Program is designed to encourage correction of 
fiduciary breaches and compliance with the law by permitting persons to 
avoid potential Department of Labor civil enforcement actions and civil 
penalties if they voluntarily correct eligible transactions in a manner 
that meets the requirements of the Program. PTE 2002-51 is a related 
class exemption that allows excise tax relief from excise taxes imposed 
by the Internal Revenue Code of 1986, as amended, for certain eligible 
transactions corrected pursuant to the VFC Program. This amendment to 
PTE 2002-51 is being finalized in connection with the Department's 
amendment and restatement of the VFC Program, published elsewhere in 
this issue of the Federal Register (2025 VFC Program). These amendments 
simplify and expand the VFC Program and exemptive relief to make the 
Program and exemption easier to use and more useful for employers and 
others who wish to avail themselves of the relief provided. The 
amendment to PTE 2002-51 affects plans, participants and beneficiaries 
of such plans, and certain other persons engaging in such transactions.

DATES: This amendment will be in effect on March 17, 2025.

FOR FURTHER INFORMATION CONTACT: Emily Harris, Office of Exemption 
Determinations, Employee Benefits Security Administration, U.S. 
Department of Labor, telephone number (202) 693-8540. Brian J. Buyniski 
or Yolanda Wartenberg, Office of Regulations and Interpretations, 
Employee Benefits Security Administration (EBSA), (202) 693-8500, for 
questions regarding the VFC Program amendments. James Butikofer, Office 
of Research and Analysis, EBSA, (202) 693-8410, for questions regarding 
the regulatory impact analysis. (These are not toll-free numbers.)
    For general questions regarding the VFC Program: contact Dawn 
Miatech-Plaska, Office of Enforcement, EBSA, (202) 693-8691. For 
questions regarding specific applications and self-corrections under 
the VFC Program: contact the appropriate EBSA Regional Office listed in 
appendix C to the 2025 VFC Program. (These are not toll-free numbers.)
    Customer Service Information: Individuals interested in obtaining 
information from the Department concerning the Employee Retirement 
Income Security Act of 1974 (ERISA) and employee benefit plans may call 
the Employee Benefits Security Administration's Toll-Free Hotline, at 
1-866-444-EBSA (3272) or visit the Department's website (www.dol.gov/ebsa).

SUPPLEMENTARY INFORMATION:

Background

History of the VFC Program and Class Exemption

    The VFC Program gives plans and fiduciaries a ready means to 
correct violations of ERISA, without the transaction costs and burden 
associated

[[Page 3668]]

with enforcement actions for violations of the fiduciary standards in 
title I of ERISA. As an enforcement policy, the VFC Program 
simultaneously promotes compliance with the law, correction of 
violations, and the efficient use of scarce enforcement resources. The 
Department also has the authority under ERISA section 408(a) to issue 
exemptions from the prohibited transaction rules in ERISA sections 406 
and 407 and Internal Revenue Code (Code) section 4975.\1\ Accordingly, 
in tandem with an amendment to the VFC Program published elsewhere in 
this issue of the Federal Register, the Department is publishing this 
associated amendment to Prohibited Transaction Exemption (PTE) 2002-51, 
which implements important components of the VFC Program.
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    \1\ Under Reorganization Plan No. 4 of 1978, 5 U.S.C. App., the 
authority of the Secretary of Treasury to issue exemptions pursuant 
to Code section 4975 was transferred, with certain exceptions not 
relevant here, to the Secretary of Labor.
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    The Department of Labor's Employee Benefits Security Administration 
(EBSA) originally adopted the VFC Program in 2002, and later revised it 
in 2005 and 2006.\2\ EBSA designed the VFC Program to encourage 
employers and plan fiduciaries to voluntarily comply with ERISA and 
allow those potentially liable for certain specified fiduciary breaches 
under ERISA to voluntarily apply for relief from enforcement actions 
and certain penalties, provided they meet the VFC Program's criteria 
and follow the procedures outlined in the VFC Program.
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    \2\ 67 FR 15062 (March 28, 2002); 70 FR. 17516 (April 6, 2005); 
71 FR. 20262 (April 19, 2006).
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    The VFC Program describes how to apply for relief and lists the 
specific transactions covered and the acceptable methods for correcting 
fiduciary breaches under the Program. The most frequently corrected 
transaction under the Program is the correction of delinquent 
participant contributions. The Program provides a model application 
form, a checklist, and an online calculator for determining amounts to 
be restored to plans. The VFC Program has been, and will continue to 
be, administered in EBSA's Regional Offices.
    The Department granted PTE 2002-51 in connection with the VFC 
Program. Some of the breaches that may be corrected under the VFC 
Program are also prohibited transactions subject to excise tax under 
Code section 4975. Reorganization Plan No. 4 of 1978 transferred the 
authority of the Secretary of Treasury to issue exemptions from the 
prohibited transaction provisions of Code section 4975 to the Secretary 
of Labor.\3\ The exemption allows excise tax relief for certain 
specified breaches under the VFC Program. PTE 2002-51 is subject to 
several general conditions, including that the breach be appropriately 
corrected and the party applying must satisfy all the conditions of the 
VFC Program. The exemption also includes certain transaction-specific 
conditions.
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    \3\ 5 U.S.C. App.
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2022 Proposal

    On November 21, 2022, the Department published in the Federal 
Register proposed revisions to the VFC Program with a request for 
public comments.\4\ The 2022 VFC Program proposed revisions would 
establish a self-correction feature for certain delinquent participant 
contributions and loan repayments to pension plans (the SCC). On the 
same date, the Department also published in the Federal Register a 
proposed amendment to PTE 2002-51 that would make certain conforming 
amendments to the class exemption.\5\ The Department received seven 
comments on the proposed amendment.
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    \4\ 87 FR 71164 (Nov. 21, 2022).
    \5\ 87 FR 70753 (Nov. 21, 2022).
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    On February 14, 2023, the Department reopened the comment period on 
both the 2022 Program VFC Program proposed revisions and the proposed 
amendment to PTE 2002-51 in light of section 305(b)(2) of the SECURE 
2.0 Act of 2022 (SECURE 2.0 Act.\6\ This provision requires the 
Department to treat eligible inadvertent failures related to 
participant loans that are self-corrected under the Employee Plans 
Compliance Resolution System \7\ (IRS's EPCRS) as meeting the 
requirements of the VFC Program ``if, with respect to the violation of 
the fiduciary standards of the ERISA, there is a similar loan error 
eligible for correction under EPCRS and the loan error is corrected in 
such manner.'' The Department requested comments on what revisions, if 
any, it should make to the VFC Program and exemption to reflect the 
treatment of corrections of loans to participants as described in 
SECURE 2.0 Act. Only one commenter addressed PTE 2002-51 in response 
and stated that no further amendments are required to the exemption.
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    \6\ Enacted on December 29, 2022, as Division T of the 
Consolidated Appropriations Act, 2023, Public Law 117 328, 136 Stat. 
4459 (2022).
    \7\ As described in Rev. Proc. 2021-30, or any successor 
guidance).
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2025 VFC Program

    The Department is finalizing the amendment to the VFC Program 
elsewhere in this edition of the Federal Register. With these 
amendments, EBSA intends to facilitate more efficient and less costly 
corrections of fiduciary breaches under the VFC Program, encourage 
greater participation in the VFC Program, and respond to requests from 
stakeholders for adjustments based on their experiences using the VFC 
Program. In this regard, the amendments are designed to simplify the 
VFC Program and make it easier to use by employers and others who wish 
to avail themselves of the relief provided. Notably, the new self-
correction procedures will apply to the transaction most frequently 
corrected under the VFC Program--the delinquent transmittal of 
participant contributions and loan repayments to pension plans--as well 
as to certain participant loan failures that are self-corrected under 
the IRS's EPCRS. The Department anticipates that many users of the 
amended Program will find it improved and less resource intensive to 
comply with, without sacrificing protections of their affected plans.
    The 2025 VFC Program retains the fundamentals of the 2006 VFC 
Program. The Program describes how to apply for relief, lists the 
specific transactions covered, and sets forth acceptable methods for 
correcting fiduciary breaches under the VFC Program. It also provides 
examples of potential breaches and related permissible corrective 
actions. The VFC Program defines the term ``Breach'' to mean any 
transaction that is or may be a violation of the fiduciary 
responsibilities contained in part 4 of title I of ERISA. The VFC 
Program also provides a model application form, a checklist, and an 
Online Calculator for determining correction amounts. The VFC Program 
will continue to be administered in EBSA Regional Offices. Eligible 
applicants that satisfy the terms and conditions of the VFC Program 
application process receive a ``no action'' letter from EBSA and are 
not subject to civil monetary penalties for the corrected transactions.
    The most significant changes in the 2025 VFC Program involve the 
addition of two new self-correction features. The first is in section 
7.1(b) for certain failures to timely transmit participant 
contributions (and participant loan repayments) to pension plans,\8\ 
and the second is in section 7.3(c) for certain

[[Page 3669]]

participant loan failures that are self-corrected under the IRS's 
EPCRS. The other 2025 VFC Program amendments: (1) clarify existing 
transactions eligible for correction under the VFC Program; (2) expand 
the scope of certain transactions currently eligible for correction; 
and (3) simplify certain administrative or procedural requirements for 
participation in the VFC Program and correction of transactions under 
the VFC Program.
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    \8\ The term pension plans include both defined contribution 
plans and defined benefit plans. See ERISA section 3(34) and 3(35).
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Description of the Amendments to PTE 2002-51

    The Department is amending PTE 2002-51 to provide excise tax relief 
for transactions that are corrected pursuant to the SCC in the 2025 VFC 
Program and to make certain administrative or procedural changes for 
participation in, and correction of, transactions under the VFC 
Program.\9\
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    \9\ As noted above, under Reorganization Plan No. 4 of 1978, 5 
U.S.C. App., the authority of the Secretary of Treasury to issue 
exemptions pursuant to Code section 4975 was transferred to the 
Secretary of Labor.
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Self-Correction Feature for Delinquent Participant Contributions and 
Loan Repayments to Pension Plans

    The 2025 VFC Program establishes the SCC for certain delinquent 
contributions to pension plans. The SCC allows ``self-correctors'' to 
make a plan whole and receive relief under the VFC Program without 
submitting an application to EBSA and receiving a no-action letter. 
Instead, self-correctors provide a notice (the SCC notice) to EBSA 
through an electronic tool on EBSA's website and receive an email 
acknowledgement from EBSA of a properly completed and submitted SCC 
notice.
    The Department is amending PTE 2002-51 to allow excise tax relief 
to self-correctors. The Department is adding transactions that are 
corrected under the SCC to section I.A. These transactions must comply 
with the applicable exemption conditions, including the requirement 
that delinquent contributions may not have been transmitted to the plan 
more than 180 calendar days from the date they were either received by 
the employer or otherwise would have been payable to the participant in 
cash. The Department is also amending section III.B of the exemption, 
which provides that the exemption will apply only if the applicant 
receives an EBSA no-action letter pursuant to the VFC Program. Since 
self-correctors will receive an email acknowledgement instead of a no-
action letter from EBSA, this condition is amended to add a specific 
reference to the email acknowledgement of a properly completed and 
submitted SCC notice.

Frequency of Use

    Historically, PTE 2002-51 was generally not available to VFC 
Program applicants that had taken advantage of the relief provided by 
the VFC Program and the exemption for a similar type of transaction 
within the previous three years. The Department proposed to eliminate 
the three-year limitation to encourage greater use of the VFC Program.
    The Department requested comment in the proposal regarding whether 
the proposed removal of the three-year limitation would encourage 
greater use of the VFC Program without loss of meaningful protections 
for participants and beneficiaries. Several commenters supported the 
proposal and stated that the existing limitation was unnecessary to 
protect participants. However, one commenter disagreed with the 
proposal and cautioned that removing the three-year limitation may 
encourage more employers to delay depositing employee contributions and 
instead use that money for business expenses. This commenter suggested 
that if the Department chose to eliminate the three-year limitation 
period, it should do so on a trial basis so that the Department could 
monitor how often employers are using the VFC Program. After 
considering this comment, the Department has decided to finalize the 
amendment as proposed; however, it will monitor how frequently plan 
fiduciaries rely on the VFC Program (including the SCC) and may 
consider further amendments in the future.

Sale and Leaseback of Real Property to an Employer

    Section I.D. of PTE 2002-51 applies to the sale of real property to 
a plan by the sponsoring employer and the leaseback of such property to 
the same employer if it is corrected as required under the VFC Program. 
The Department is amending this section as proposed. The amendment 
expands the covered transactions in section I.D. to include affiliates 
of plan sponsors, which reflects a change made in the 2025 VFC Program. 
Accordingly, the amended exemption is available for a sale of real 
property by an affiliate of the employer sponsoring the plan, to the 
plan, and a leaseback of such property to the affiliate of the 
sponsoring employer.
    As amended, the term ``affiliate'' of a person is defined as 
follows--

    (1) any person directly, or indirectly through one or more 
intermediaries, controlling, controlled by, or under common control 
with the person; (2) any officer, director, partner, employee, or 
member of the family (as defined in Code section 4975(e)(6)) of the 
person; or (3) any corporation or partnership of which such person 
is an officer, director, partner or employee.

The term ``control'' is defined as the power to exercise a controlling 
influence over the management of a person other than an individual.\10\
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    \10\ Both terms are defined in a new section V.
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Deletion of Section II.E.

    The Department is deleting section II.E. of the exemption as 
proposed. The condition related to all the covered transactions under 
section I and required that ``the transaction was not part of an 
agreement, arrangement or understanding designed to benefit a 
disqualified person.'' The Department believes that this condition is 
unnecessary in light of the other, more specific conditions of the 
exemption, including the requirement that the transaction must have 
been corrected in accordance with the applicable requirements of the 
VFC Program for the exemption to apply.

Notice to Interested Persons

    Section IV governs notice to interested persons. VFC Program 
applicants generally must inform interested persons of the prohibited 
transaction(s) that occurred and the steps taken to correct those 
violations. The notice must give participants and beneficiaries the 
opportunity to comment on the transactions and corrections to the 
applicable EBSA Regional Office.
    The Department proposed two key changes to the notice requirement 
for VFC Program applicants. First, the Department proposed that the 
notice could not be provided through posting alone. The Department 
explained that although section IV.B. had historically allowed notice 
through ``posting, regular mail, or electronic mail, or any combination 
thereof,'' the Department no longer believed that posting is reasonably 
calculated to ensure that interested persons actually receive the 
notice. Therefore, the Department is finalizing this provision as 
proposed.
    The Department also included a model notice to interested persons 
as an appendix to the proposal. The Department drafted this model 
notice after reviewing several notices to interested persons that were 
submitted to the Regional Offices but did not meet the applicable 
requirements of section IV. The Department is publishing the model 
notice as an appendix to the final amendment to ensure that 
participants and beneficiaries receive meaningful

[[Page 3670]]

notice of transactions for which relief is sought by their plans. The 
only change to the model notice from the proposal is that the final 
model notice states that you may ``contact'' the appropriate EBSA 
Regional Office instead of ``mail.'' The Department intends for the 
model notice to facilitate compliance with the exemption, but it is not 
requiring VFC Program applicants to use the model notice.
    Regardless of whether a VFC Program applicant uses the model 
notice, the notice must be written in a manner reasonably calculated to 
be understood by the average Plan participant or beneficiary. In this 
regard, if a plan fiduciary knows or has reason to know that the 
average Plan participant or beneficiary covered by its plan would not 
understand a notice written in English, the fiduciary must take 
appropriate action to ensure that these interested parties have a 
reasonable opportunity to become informed of their rights described in 
the notice.\11\ As a compliance aid, the Department is making the model 
notice available on its website in twelve non-English languages.
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    \11\ See e.g., 29 CFR 2520.102-2(c)(2) regarding summary plan 
descriptions.
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Notice Exception for Self-Correctors

    In light of the streamlined procedure for self-correction and the 
SCC's limitation to corrections when the amount of lost earnings is 
$1,000 or less, the proposed exemption provided that self-correctors 
would not have to provide notice to interested persons. Instead, they 
would be required to pay the amount of the excise tax that would 
otherwise be imposed by Code section 4975 to the plan. Self-correctors 
would be required to retain a completed Form 5330 or other written 
documentation that shows the calculation of the amount of otherwise 
applicable excise taxes and proof they paid that amount to the plan. 
However, there would no requirement to provide this documentation to 
EBSA. The Department is finalizing the special notice rule for self-
correctors as proposed.
    Some commenters expressed concern that this contribution 
requirement would discourage use of the SCC and suggested that the 
Department should allow self-correctors to choose whether (a) to 
provide notice to interested persons (but not to EBSA) or (b) make the 
plan contribution. After considering these comments, the Department has 
not made this change. Self-correctors have a streamlined procedure for 
self-correction and the amount of otherwise applicable excise taxes 
that will be owed to their plans will be small due to the $1,000 
limitation on lost earnings. The Department has determined that 
requiring these amounts to be paid to the plan is the most beneficial 
to and protective of participants in plans that self-correct under the 
SCC.

Other Ministerial Amendments

    The Department is finalizing certain ministerial changes to PTE 
2002-51 to improve readability. For example, the Department is 
replacing references ``to sections of the Code'' to instead refer to 
``Code section.''

Executive Order 12866 (Regulatory Planning and Review), Executive Order 
14094 (Modernizing Regulatory Review), and 13563 (Improving Regulation 
and Regulatory Review)

    Under Executive Order 12866 (as amended by Executive Order 14094), 
the Office of Management and Budget (OMB)'s Office of Information and 
Regulatory Affairs determines whether a regulatory action is 
significant and, therefore, subject to the requirements of the 
Executive order and review by OMB. 58 FR 51735. As amended by Executive 
Order 14094, section 3(f) of Executive Order 12866 defines a 
``significant regulatory action'' as a regulatory action that is likely 
to result in a rule that may: (1) have an annual effect on the economy 
of $200 million or more; or adversely affect in a material way the 
economy, a sector of the economy, productivity, competition, jobs, the 
environment, public health or safety, or State, local, territorial, or 
Tribal governments or communities; (2) create a serious inconsistency 
or otherwise interfere with an action taken or planned by another 
agency; (3) materially alter the budgetary impact of entitlements, 
grants, user fees or loan programs or the rights and obligations of 
recipients thereof; or (4) raise legal or policy issues for which 
centralized review would meaningfully further the President's 
priorities or the principles set forth in the Executive order. OMB has 
determined that this amendment is a significant regulatory action under 
Executive Order 12866.\12\
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    \12\ See 2022 VFC Program proposed revisions, section D, 
``Regulatory Impact Analysis.''
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    Executive Order 13563 directs agencies to propose or adopt a 
regulation only upon a reasoned determination that its benefits justify 
its costs; the regulation is tailored to impose the least burden on 
society, consistent with achieving the regulatory objectives; and in 
choosing among alternative regulatory approaches, the agency has 
selected those approaches that maximize net benefits. Executive Order 
13563 recognizes that some benefits are difficult to quantify and 
provides that, where appropriate and permitted by law, agencies may 
consider and discuss qualitative values that are difficult or 
impossible to quantify, including equity, human dignity, fairness, and 
distributive impacts. See the 2025 VFC Program amendment published 
elsewhere in this issue of the Federal Register for the regulatory 
impact analysis.

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (PRA) (44 
U.S.C. 3506(c)(2)(A)), the Department solicited comments concerning the 
information collection request (ICR) included in the 2022 VFC Program 
proposed revisions. At the same time, the Department also submitted the 
ICR to OMB, in accordance with 44 U.S.C. 3507(d).
    The Department received comments that addressed the burden 
estimates used in the analysis of the 2022 VFC Program proposed 
revisions. The Department reviewed these public comments in developing 
the paperwork burden analysis.
    The changes made by these final rules affect the existing OMB 
control number, 1210-0118. A copy of the ICR for OMB Control Number 
1210-0118 may be obtained at RegInfo.gov (reginfo.gov/public/do/PRAMain) or by contacting the PRA addressee:

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By mail..............................  PRA Officer, Office of Research
                                        and Analysis, Employee Benefits
                                        Security Administration, U.S.
                                        Department of Labor, 200
                                        Constitution Avenue NW, Room N-
                                        5718, Washington, DC 20210.
By email.............................  [email protected].
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    See the 2025 VFC Program amendment published elsewhere in this 
issue of the Federal Register for the paperwork burden of the amended 
VFC Program and the amended PTE 2002-51.

[[Page 3671]]

Regulatory Flexibility Analysis

    The Regulatory Flexibility Act (RFA) \13\ imposes certain 
requirements with respect to Federal rules that are subject to the 
notice and comment requirements of section 553(b) of the Administrative 
Procedure Act, or any other law, and are likely to have a significant 
economic impact on a substantial number of small entities.\14\ Pursuant 
to section 605 of the RFA, the Department certifies that these proposed 
amendments to PTE 2002-51 will not have a significant economic impact 
on a substantial number of small entities.\15\ See the 2025 VFC Program 
amendment published elsewhere in this issue of the Federal Register for 
the factual basis for the certification.
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    \13\ 5 U.S.C. 601 et seq. (1980).
    \14\ 5 U.S.C. 551 et seq. (1946).
    \15\ 5 U.S.C. 605 (1980).
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General Information

    The attention of interested persons is directed to the following:
    (1) The fact that a transaction is the subject of an exemption 
under Code section 4975(c)(2) does not relieve a fiduciary or other 
disqualified person with respect to a plan from certain other 
provisions of ERISA and the Code, including any prohibited transaction 
provisions to which the exemption does not apply, the requirement that 
all assets of an employee benefit plan be held in trust by one or more 
trustees, and the general fiduciary responsibility provisions of ERISA 
which require, among other things, that a fiduciary discharge their 
duties respecting the plan solely in the interests of the participants 
and beneficiaries of the plan and in a prudent fashion; nor does it 
affect the requirement of Code section 401(a) that the plan must 
operate for the exclusive benefit of the employees of the employer 
maintaining the plan and their beneficiaries.
    (2) The amendment to PTE 2002-51 does not extend to transactions 
prohibited under Code section 4975(c)(1)(F).
    (3) The Department finds that the amendment is administratively 
feasible, in the interests of plans and their participants and 
beneficiaries, and protective of the rights of participants and 
beneficiaries of such plans.
    (4) The exemption, as amended, is supplemental to, and not in 
derogation of other provisions of ERISA and the Code, including 
statutory or administrative exemptions and transitional rules. 
Furthermore, the fact that a transaction is subject to an 
administrative or statutory exemption is not dispositive of whether the 
transaction is in fact a prohibited transaction.
    (5) The exemption, as amended, is applicable to a transaction only 
if the conditions specified in the class exemption are satisfied.
    The Department has republished the entire text of the amended PTE 
2002-51 for the convenience of readers.

Amendment to PTE 2002-51

    Under Code section 4975(c)(2) and in accordance with the procedures 
set forth in 29 CFR 2570, subpart B (76 FR 66637, October 27, 2011), 
the Department amends and restates PTE 2002-51 as set forth below.

Section I. Eligible Transactions

    The sanctions resulting from the application of Code section 
4975(a) and (b), by reason of Code section 4975(c)(1)(A) through (E), 
shall not apply to the following eligible transactions described in 
section 7 of the Voluntary Fiduciary Correction (VFC) Program, as 
amended, provided that the applicable conditions set forth in sections 
II, III, and IV are met:
    A. Failure to forward participant contributions and/or loan 
repayments to a pension plan for investment within the time frames 
determined with reference to the principles of the Department's 
regulation at 29 CFR 2510.3-102 so that the employer retains such 
contributions or loan repayments for a longer period of time. (See VFC 
Program, sections 7.1(a) and (b).)
    B. Loan at a fair market interest rate to a disqualified person 
with respect to a plan. (See VFC Program, section 7.2(a).)
    C. Purchase or sale of an asset (including real property) between a 
plan and a disqualified person at fair market value. (See VFC Program, 
sections 7.4(a) and (b).)
    D. Sale of real property to a plan by the employer or an affiliate 
of such an employer and the leaseback of the property to the employer 
or the affiliate, at fair market value and fair market rental value, 
respectively. (See VFC Program, section 7.4(c).)
    E. Purchase of an asset (including real property) by a plan, where 
the asset has later been determined to be illiquid as described under 
the VFC Program in a transaction which was a prohibited transaction 
pursuant to Code section 4975(c)(1), or in which the asset was acquired 
from an unrelated third party, and/or the subsequent sale of such asset 
in a transaction prohibited pursuant to Code section 4975(c)(1). (See 
VFC Program, section 7.4(f).)
    F. Use of plan assets to pay expenses, including commissions or 
fees, to a service provider (e.g., attorney, accountant, recordkeeper, 
actuary, financial advisor, or insurance agent) for services provided 
in connection with the establishment, design or termination of the plan 
(settlor expenses), which relate to the activities of the plan sponsor 
in its capacity as settlor, provided that the payment of the settlor 
expense was not expressly prohibited by a plan provision relating to 
the payment of expenses by the plan. (See VFC Program, section 7.6(b).)

Section II. Conditions

    A. With respect to a transaction involving participant 
contributions or loan repayments to pension plans described in section 
I.A., the contributions or repayments were transmitted to the pension 
plan not more than 180 calendar days from the date the amounts were 
received by the employer (in the case of amounts that a participant or 
beneficiary pays to an employer) or the date the amounts otherwise 
would have been payable to the participant in cash (in the case of 
amounts withheld by an employer from a participant's wages).
    B. With respect to the transactions described in sections I.B., 
I.C., I.D., or I.E., the plan assets involved in the transaction, or 
series of related transactions, did not, in the aggregate, exceed 10 
percent of the fair market value of all the assets of the plan at the 
time of the transaction.
    C. The fair market value of any plan asset involved in a 
transaction described in sections I.C., I.D., or I.E., was determined 
in accordance with section 5 of the VFC Program.
    D. The terms of a transaction described in sections I.B., I.C., 
I.D., I.E., or I.F., were at least as favorable to the plan as the 
terms generally available in arm's-length transactions between 
unrelated parties.
    E. With respect to a transaction involving a sale of an illiquid 
asset under the VFC Program described in section I.E., the plan paid no 
brokerage fees, or commissions in connection with the sale of the 
asset.
    F. With respect to any transaction described in section I.F., the 
amount of plan assets involved in the transaction or series of related 
transactions did not, in the aggregate, exceed the lesser of $10,000 or 
five (5) percent of the fair market value of all the assets of the plan 
at the time of the transaction.

Section III. Compliance With the VFC Program

    A. The applicant or self-corrector, as applicable, has met all 
applicable requirements of the VFC Program.

[[Page 3672]]

    B. EBSA has issued a no-action letter to the applicant pursuant to 
the VFC Program with respect to a transaction described in section I, 
other than for transactions corrected pursuant to the SCC of the VFC 
Program. For transactions corrected pursuant to the SCC of the VFC 
Program, the terms of this section will be satisfied if EBSA has 
acknowledged receipt of the SCC notice in accordance with section 6.2 
of the VFC Program.

Section IV. Notice to Interested Persons and Special Rules for Self-
Correctors

    A. Written notice of the transaction(s) for which the applicant is 
seeking relief pursuant to the VFC Program, and this exemption, and the 
method of correcting the transaction, was provided to interested 
persons within 60 calendar days following the date of the submission of 
an application under the VFC Program. A copy of the notice was provided 
to the appropriate Regional Office of the United States Department of 
Labor, Employee Benefits Security Administration, within the same 60-
day period, and the applicant indicated the date upon which notice was 
distributed to interested persons. Plan assets were not used to pay for 
the notice. The notice included an objective description of the 
transaction and the steps taken to correct it, written in a manner 
reasonably calculated to be understood by the average Plan participant 
or beneficiary. The notice provided for a period of 30 calendar days, 
beginning on the date the notice was distributed, for interested 
persons to provide comments to the appropriate Regional Office, and it 
included the address and telephone number of such Regional Office. The 
Model Notice to Interested Persons contained in Appendix A may be used 
to satisfy the written notice requirement contained in this section IV.
    B. The notice to interested persons described in section IV.A. was 
provided in a manner that was reasonably calculated, taking into 
consideration the circumstances of the plan, to result in the receipt 
of such notice by interested persons, including but not limited to 
regular mail, or electronic mail, or any combination thereof. The 
notice informed interested persons of the applicant's participation in 
the VFC Program and intention of availing itself of relief under the 
exemption.
    C. Notwithstanding the foregoing and solely with respect to 
applicants seeking relief with respect to the VFC Program other than 
through the SCC, section IV.A. and IV.B. shall not apply to a 
transaction described in section I.A., provided that: (1) the applicant 
under the VFC Program has met all of the other applicable Program 
requirements; (2) the amount of the excise tax that otherwise would be 
imposed by Code section 4975 with respect to any transaction(s) 
described in section I.A would be less than or equal to $100; (3) the 
amount of the excise tax that otherwise would be imposed by Code 
section 4975 was paid to the plan and allocated to the individual 
accounts of participants and beneficiaries in the same manner as 
provided under the plan with respect to plan earnings; and (4) the 
applicant under the VFC Program provides a copy of a completed IRS Form 
5330 or written documentation containing the information required by 
IRS Form 5330 and proof of payment with the submission of the 
application to the appropriate EBSA Regional Office. For the sole 
purpose of determining whether the excise tax due under Code section 
4975 on the ``amount involved'' with respect to the prohibited 
transaction involving the failure to timely transmit participant 
contributions and loan repayments is less than or equal to $100, an 
applicant may calculate the excise tax due based upon the Lost Earnings 
amount computed using the online calculator provided under the Program.
    D. Notwithstanding the foregoing and solely with respect to self-
correctors seeking relief with respect to transactions corrected 
pursuant to the SCC of the VFC Program, section IV.A. and B. shall not 
apply, and additionally the self-corrector must: (1) pay to the plan 
the amount of the excise tax that otherwise would be imposed by Code 
section 4975 and allocate such amount to the individual accounts of 
participants and beneficiaries in the same manner as provided under the 
plan with respect to plan earnings, and (2) retain a copy of a 
completed IRS Form 5330 or written documentation regarding the 
determination of the otherwise applicable excise tax and proof of 
payment of the amounts paid to the plan pursuant to the VFC Program and 
this exemption and (3) provide to the plan administrator a copy of such 
documentation. Self-correctors must calculate the excise tax otherwise 
due based upon the Lost Earnings amount computed using the online 
calculator provided under the Program.

Section V. Definitions

    A. For purposes of this exemption the term ``affiliate'' of a 
person means (1) any person directly, or indirectly through one or more 
intermediaries, controlling, controlled by, or under common control 
with the person; (2) any officer, director, partner, employee, member 
of the family (as defined in Code section 4975(e)(6)) of the person; or 
(3) any corporation or partnership of which such person is an officer, 
director, partner or employee.
    B. For purposes of this section V, the term ``control'' means the 
power to exercise a controlling influence over the management or 
policies of a person other than an individual.

    Signed at Washington, DC, this 3rd day of January 2025.
Lisa M. Gomez,
Assistant Secretary, Employee Benefits Security Administration, U.S. 
Department of Labor.

Appendix A--Model Notice to Interested Persons

Dear [Participant or Beneficiary],

    The purpose of this letter is to notify you that the [Insert 
Name of Applicant] is participating in the U.S. Department of 
Labor's Voluntary Fiduciary Correction (VFC) Program with respect to 
the [Insert Name of Plan]. The VFC Program is a voluntary 
enforcement program that encourages the correction of possible 
breaches of Title I of the Employee Retirement Income Security Act 
(ERISA).
    ERISA is the federal law that covers most employee benefit plans 
in the private sector. The U.S. Department of Labor's Employee 
Benefits Security Administration (EBSA) enforces many parts of 
ERISA. If the terms and conditions of the VFC Program are met by 
[Insert Name of Applicant], EBSA will not initiate a civil 
investigation under Title I of ERISA with respect to the transaction 
and voluntary correction described below.
    The VFC Program is accompanied by a ``class exemption'' from 
certain excise taxes imposed under the Internal Revenue Code on 
parties participating in ``prohibited transactions'' as defined in 
ERISA and the Code. The purpose of the prohibited transaction rules 
is to prevent dealings with persons or entities that may be in a 
position to exercise improper influence over employee benefit plan 
assets including [Name of the Plan]. If the terms of the class 
exemption are met, [Insert Name of Applicant] will qualify for 
relief from the excise taxes that would otherwise apply.
    One of the requirements for excise tax relief is for [Insert 
Name of Applicant] to provide you with this notice so you have an 
opportunity to provide comments to EBSA about the prohibited 
transaction and the steps taken to correct the prohibited 
transaction, both of which are described below. To the extent that 
you are interested in providing your written comments to EBSA, you 
may contact them [Insert the Name of the Appropriate EBSA Regional 
Office from the VFC Program Notice, Appendix C]. The written 
comments should be made to the attention of the ``VFC Program 
Coordinator.'' The address and telephone number for this office are 
[Insert from VFC Program Notice, Appendix C]. You have 30 calendar 
days, beginning on the date this notice was distributed, to provide 
written comments. Individuals submitting written

[[Page 3673]]

comments on this matter are advised not to disclose sensitive 
personal data such as social security numbers.
    [Insert An Objective Description of the Transaction and the 
Steps Taken to Correct the Transaction]
    Please feel free to contact me if you have any questions at 
[Insert Telephone Number of a Person Employed by the Applicant Who 
Is Knowledgeable About this Matter].

Sincerely,
[Insert Name and Title of Person Employed by the Applicant]

[FR Doc. 2025-00328 Filed 1-14-25; 8:45 am]
BILLING CODE 4510-29-P
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