`[Federal Register Volume 90, Number 9 (Wednesday, January 15, 2025)]
[Rules and Regulations]
[Pages 4192-4231]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-00327]



[[Page 4191]]

Vol. 90

Wednesday,

No. 9

January 15, 2025

Part IV





Department of Labor





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 Employee Benefits Security Administration





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29 CFR Parts 2560 and 2570





Voluntary Fiduciary Correction Program; Final Rule

  Federal Register / Vol. 90 , No. 9 / Wednesday, January 15, 2025 / 
Rules and Regulations  

[[Page 4192]]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration

29 CFR Parts 2560 and 2570

RIN 1210-AB64


Voluntary Fiduciary Correction Program

AGENCY: Employee Benefits Security Administration, Department of Labor.

ACTION: Notification of adoption of Updated Voluntary Fiduciary 
Correction Program.

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SUMMARY: This document contains an amended and restated Voluntary 
Fiduciary Correction Program (VFC Program or Program) under title I of 
the Employee Retirement Income Security Act of 1974, as amended 
(ERISA). 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. The amendments to the 
Program simplify and expand the VFC Program to make the Program easier 
to use and more useful for employers and others who wish to avail 
themselves of the relief provided. Specifically, the Program amendments 
add a self-correction feature for delinquent transmittal of participant 
contributions and loan repayments to a pension plan under certain 
circumstances; clarify some existing transactions eligible for 
correction under the Program; expand the scope of other transactions 
currently eligible for correction; and simplify certain administrative 
or procedural requirements for participation in and correction of 
transactions under the VFC Program. In addition, the amendments 
implement section 305(b)(2) and (3) of the SECURE 2.0 Act of 2022 
(SECURE 2.0 Act) by adding a self-correction feature for certain 
participant loan failures self-corrected under the Internal Revenue 
Service's Employee Plans Compliance Resolution System (as described in 
Rev. Proc. 2021-30, or any successor guidance) (IRS's EPCRS).

DATES: The amendments to the VFC Program contained in this document are 
effective on March 17, 2025.

FOR FURTHER INFORMATION CONTACT: 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 in this document. Emily Harris, 
Office of Exemption Determinations, EBSA, (202) 693-8540, for questions 
regarding the amended associated class exemption PTE 2002-51. 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. (These are not toll-free numbers.)
    Customer Service Information: Individuals interested in obtaining 
information from the Department concerning ERISA and employee benefit 
plans may call the EBSA Toll-Free Hotline, at 1-866-444-EBSA (3272) or 
visit the Department's website (www.dol.gov/ebsa).

SUPPLEMENTARY INFORMATION: 

A. Summary Overview

    The Voluntary Fiduciary Correction Program (VFC Program or Program) 
gives plans and fiduciaries a ready means to correct violations of 
ERISA, without the transaction costs and burden associated with 
enforcement actions for violations of the fiduciary standards in title 
I of ERISA), 29 U.S.C. 1132(a)(2) and 1132(a)(5). As an enforcement 
policy, the 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 section 408(a) 
of ERISA (29 U.S.C. 1108) to issue exemptions from the prohibited 
transaction rules in sections 406 and 407 of ERISA (29 U.S.C. 1106 and 
1107) and in section 4975 of the Internal Revenue Code (Code).\1\ 
Accordingly, in tandem with this amendment to the Program and in this 
same issue of the Federal Register, the Department has also published 
associated amendments 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 EBSA 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 civil enforcement actions and 
certain civil penalties, provided they meet the Program's criteria and 
follow the procedures outlined in the 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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    Although the Department is not required to seek public comments on 
changes to an enforcement policy, in November 2022, EBSA published 
proposed revisions to the VFC Program with a request for public 
comments. The Department also proposed amendments to PTE 2002-51 for 
coordination. Additionally, because the VFC Program includes 
information collections that are subject to the Paperwork Reduction 
Act, the Department sought public comment in the November 2022 proposal 
on the revisions to the information collections included in the 
amendments to the VFC Program. The proposal discussed the revisions and 
incorporated them into a restatement of the VFC Program in its entirety 
for ease of reference. Comments received on the 2022 VFC Program 
proposed revisions and the proposed amendments to the related class 
exemption are posted on EBSA's website.
    After careful consideration of the issues raised in the comment 
letters, EBSA decided to adopt final changes to the Program as 
discussed herein. In tandem with this publication of the 2025 VFC 
Program, EBSA is publishing final amendments to PTE 2002-51 to conform 
with certain revisions in the 2025 VFC Program. For a discussion of the 
amendments to the class exemption and the public comments to those 
changes, see amended PTE 2002-51, which is also published elsewhere in 
this issue of the Federal Register.
    With these amendments, EBSA intends to facilitate more efficient 
and less costly corrections of fiduciary breaches under the Program, 
encourage greater participation in the Program, and respond to requests 
from stakeholders for adjustments based on their experiences using the 
Program. In this regard, the amendments are designed to simplify the 
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 Program--the delinquent transmittal of participant 
contributions

[[Page 4193]]

and loan repayments to pension plans--as well as to certain participant 
loan failures self-corrected under IRS's EPCRS. The amendments also 
clarify language and simplify certain administrative and procedural 
requirements for participation in and correction of transactions under 
the Program. This includes revisions to eligibility criteria that allow 
the submission of applications covering multiple plans by a single 
service provider under certain circumstances (i.e., bulk applicants), 
as well as additional flexibility in the corrections methods for 
several violations. The Department anticipates that many users of the 
Program, as amended, will find it improved and less resource intensive, 
without sacrificing protections of the affected plans.
    The following section of this document is an overview of the 2025 
VFC Program and the Department's response to issues raised in the 
public comments. This document includes a restatement of the Program in 
its entirety to facilitate reference to and future use of the Program 
as amended.

B. Overview of Changes in the 2025 VFC Program

    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,\3\ and sets forth acceptable methods for 
correcting fiduciary breaches under the Program. It also provides 
examples of potential breaches and related permissible corrective 
actions. The 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 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. 
Excise tax relief for six specific VFC Program transactions is 
conditionally available under the amended associated class exemption, 
PTE 2002-51.\4\
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    \3\ EBSA acknowledges that it has experience with certain 
transactions fitting within one or more of the listed categories of 
transactions, even if not specifically named in the category, for 
example certain transactions involving contributions in kind under 
section 7.4(a) of the Program. EBSA encourages potential applicants 
to discuss eligibility and similar issues with the appropriate 
regional VFC Program coordinator.
    \4\ Stakeholders interested in a discussion of the components of 
the VFC Program that are not being revised in this document should 
review the Federal Register notices announcing the original 2002 
Program and the 2005 and 2006 updates, as well as the 2022 proposed 
revisions to the Program. See 67 FR 15062 (March 28, 2002), 70 FR 
17516 (April 6, 2005), 71 FR 20262 (April 19, 2006), and 87 FR 71164 
(Nov. 21, 2022). For PTE 2002-51, see 67 FR 70623 (2002); 71 FR 
20135 (2006), and 87 FR 70753 (Nov. 21, 2022). Prior to adoption in 
March 2002, the VFC Program was made available on an interim basis 
during which the Department invited and considered public comments 
on the Program. See 65 FR 14164 (March 15, 2000).
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    The most significant changes to the 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,\5\ 
and the second is in section 7.3(c) for certain participant loan 
failures self-corrected under IRS's EPCRS. The other Program amendments 
in this document: (1) clarify existing transactions eligible for 
correction under the 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 Program. A 
more detailed summary of the Program revisions is set forth below in 
this preamble.
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    \5\ 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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1. Self-Correction Component for Delinquent Participant Contributions 
to Pension Plans--Section 7.1(b)

    The 2025 VFC Program includes a new self-correction component (SCC) 
for failures to timely transmit participant contributions (and 
participant loan repayments) to pension plans in specified 
circumstances. The new SCC adds a more streamlined correction mechanism 
than is currently available under section 7.1(a) for instances in which 
employers have retained participant contributions or loan repayments 
beyond the time contemplated by the Department's regulations at 29 CFR 
2510.3-102.
    This transaction, referred to as ``delinquent participant 
contributions,'' is the type of transaction most frequently corrected 
under the Program. The Department received input from stakeholders who 
said the time and expense required to file a VFC Program application 
with the Department is a disincentive to use the Program to correct 
delinquent participant contribution transactions, especially when they 
involve small dollar amounts. Many of the comment letters submitted on 
the 2022 VFC Program proposed revisions expressed support for the self-
correction feature, pointing out that it will promote voluntary, 
timely, and efficient correction of errors; increase compliance; 
eliminate unnecessary administrative requirements and costs; free up 
EBSA resources; and help ensure participants' retirement savings are 
secure. One commenter expressed concern, however, that the elimination 
of notices or official approvals in the final Program could open the 
Program to abuse and create an impression that no one is monitoring the 
system.
    After carefully considering the public comments, the Department 
agrees that a streamlined self-correction feature for delinquent 
participant contributions to pension plans with appropriately designed 
safeguards will encourage more voluntary corrections by employers and 
other persons who are in a position to correct a Breach (Plan 
Officials). It will also enable EBSA to better allocate resources 
currently dedicated to processing VFC Program applications for these 
transactions. Accordingly, the 2025 VFC Program adds the SCC as the 
correction method for the list of eligible transactions in section 
7.1(b) entitled ``Delinquent Participant Contributions and Loan 
Repayments to Pension Plans under the Self-Correction Component.'' \6\
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    \6\ To reflect the inclusion of the SCC into the Program, 
section 6 has been renamed ``VFC Program Application and Self-
Correction Component Procedures'' and the prior section 6 has been 
renamed and re-designated as section 6.1 ``VFC Program Application 
Procedures.''
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    Under the final amendments, relief under the SCC for delinquent 
participant contributions and delinquent plan loan repayments is 
available in connection with any pension plan regardless of the size of 
the plan's participant population or amount of plan assets, so long as 
the applicant is eligible to use the Program and meets the conditions 
discussed below. While self-correctors that satisfy the terms and 
conditions of the VFC Program do not receive a no-action letter from 
EBSA, the SCC provides that compliance with the Program's terms and 
conditions will avoid the imposition of civil monetary penalties or an 
EBSA civil enforcement action against the SCC participant. As with any 
application under the Program, however, and in accordance with section 
2(b) ``Verification,'' EBSA reserves the right to conduct an 
investigation with respect to the transaction corrected through the 
SCC,

[[Page 4194]]

to determine the truthfulness and completeness of the factual 
statements set forth in the SCC notice and to confirm the corrective 
action was in fact taken.
(a) Self-Correction Component $1,000 Lost Earnings Amount Limit--
Section 7(b)(1)(ii)(A)
    Eligibility to use the SCC in section 7.1(b) is conditioned on the 
amount of Lost Earnings \7\ on the delinquent participant contributions 
or loan repayments being $1,000 or less (excluding any excise tax 
amounts paid to the plan under the related class exemption PTE 2002-
51).
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    \7\ Section 5(b)(6) defines ``Lost Earnings'' as an approximate 
amount that would have been earned by the plan on the Principal 
Amount, but for the Breach, and sets forth methodology for 
calculating Lost Earnings for purposes of the SCC.
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    Several commenters recommended eliminating, increasing, or changing 
the Lost Earnings $1,000 cap. Some of these commenters expressed the 
view that it would be desirable from a standpoint of cost and 
efficiency to allow broader availability, while other commenters 
asserted the cap would restrict large and mid-size plan sponsors from 
participating and could result in others bifurcating the correction to 
skirt the limit. Several commenters observed that using the cap on Lost 
Earnings as determined by the online calculator, which utilizes the 
Code section 6621(a)(2) underpayment rates, will result in fluctuations 
leading to inconsistency and confusion with respect to SCC eligibility.
    A variety of options were recommended by commenters, including 
increasing the Lost Earnings to $2,500 or $10,000; addition of a cost-
of-living adjustment; adopting a cap that varies based on the amount of 
plan assets or number of participants; and eliminating the cap 
altogether. Commenters further recommended the Program allow the use of 
plan's forfeiture accounts to pay for Lost Earnings, arguing that such 
use would be consistent with the IRS's EPCRS, which allows a plan 
sponsor to use plan forfeitures to fund corrective allocations in 
certain circumstances. Another commenter suggested that the Program 
include a de minimis provision under which Lost Earnings would not have 
to be calculated and included in corrective payments. Alternatively, 
the commenter suggested that the Department should allow de minimis 
Lost Earnings amounts to be paid from the plan's forfeiture account.
    After consideration of the comments, the Department has determined 
to finalize the $1,000 Lost Earnings cap as proposed. The Department 
believes that a substantial majority of delinquencies will be eligible 
for correction under the SCC even with the $1,000 Lost Earnings cap.\8\ 
However, as noted in the 2022 VFC Program proposed revisions, the 
$1,000 Lost Earnings cap along with the 180-day remittance deadline 
(discussed below) are intended to exclude delinquencies from the SCC 
when the amount or length of delinquency suggest a need for EBSA to 
actively evaluate the circumstances surrounding the breach and the 
timing of the correction under the VFC Program application process. The 
Department believes it is appropriate to retain these protective 
parameters as it proceeds with a new element of the VFC Program.
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    \8\ The 2022 VFC Program proposed revisions estimated that the 
SCC would streamline the process for 74% of small and large VFC 
Program applicants involving Lost Earnings less than or equal to 
$1,000.
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    With respect to the suggestion that the Lost Earnings calculation 
be based on the amount of plan assets or number of participants, EBSA 
believes that the Lost Earnings cap should continue to be a fixed 
figure. The VFC Program, and especially the SCC, is designed to provide 
simplicity and uniformity with an approach that eliminates complicated 
requirements for computation. A variable cap based on the total amount 
of plan assets or the total number of participants, by contrast, would 
complicate eligibility determinations and the Department's oversight of 
those determinations, undermining the goal of simplicity.
    Regarding the use of forfeitures to pay for Lost Earnings, from its 
inception in 2000, the Program has required that the cost of correction 
not be paid from plan assets. Lost Earnings is part of the correction 
amount which is described in section 5(b) as a combination of the 
Principal Amount involved in the transaction, Lost Earnings, and any 
interest on the Lost Earnings. It was further clarified in section 5(c) 
of the 2022 VFC Program proposed revisions that the cost of correction 
cannot be paid from plan assets, including charges against participant 
accounts or plan forfeitures accounts.\9\ This is still the right 
approach. It would defeat ERISA's remedial purposes, and undermine 
enforcement of the law's protections, to permit employers and 
fiduciaries to shift the cost of the correction to the plan itself, 
thereby causing new injury to the plan. Thus, this requirement and the 
clarification regarding forfeitures will continue to be part of the VFC 
Program.
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    \9\ 87 FR 71164, 71181 (November 21, 2022).
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    Several commenters seeking clarification of the timeframe to 
calculate the Lost Earnings cap asked whether each pay period is viewed 
as a separate transaction. Generally, the Department has considered 
each pay period as a separate transaction; however, the Department has 
permitted more than one pay period to be treated as one transaction 
under the VFC Program if the pay periods are close together in time and 
the delinquencies are related to the same cause.\10\
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    \10\ For a discussion on whether each pay period can be viewed 
as a separate transaction, refer to the associated class exemption, 
PTE 2002-51 and the Voluntary Fiduciary Correction Program Class 
Exemption FAQs which can be found in EBSA's website at https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/faqs/vfcp-class-exemption-faqs.pdf.
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(b) Self-Correction Component 180-Day Contribution Remittance 
Deadline--Section 7(b)(1)(ii)(B)
    To be eligible for the SCC in section 7.1(b), the delinquent 
participant contributions or loan repayments must have been remitted to 
the plan within 180 calendar days from the date of withholding from 
participants' paychecks or receipt by the employer.
    Several commenters argued that a 180-calendar day contribution 
remittance deadline was too restrictive and suggested extending it to 
either 120 days following the end of the plan year or until the due 
date of the Annual Return/Report of Employee Benefit Plans (Form 5500 
or Form 5500-SF, as applicable). As noted above, the preamble to the 
2022 VFC Program proposed revisions states that the 180-day remittance 
deadline is designed to exclude delinquencies that suggest the need for 
EBSA to actively evaluate the circumstances surrounding the breach and 
the timing of the correction. The Department continues to believe that 
a failure to identify a delinquency and remit contributions or loan 
payments due to the plan within 180 days indicates a potentially 
serious problem with the plan's processes and procedures for handling 
participant contributions and loan payments. It would not be consistent 
with prudent fiduciary administration of a plan to wait until the end 
of the plan year, the completion of the annual audit of the plan for 
annual reporting purposes, or the due date of the Form 5500 or Form 
5500-SF to check for timely transmission of participant contributions 
and loan repayments. The Department also does not believe it would be 
appropriate to structure the VFC Program in a way that suggests that it 
is consistent with ERISA's fiduciary

[[Page 4195]]

duties to wait until the end of the year, the annual audit, or the 
filing of the plan's annual report to check for delinquent transmittal 
of contributions and loan repayments. Accordingly, EBSA has decided to 
retain this requirement, which has also been part of the class 
exemption since its inception in 2002, and which is intended to provide 
protection to participants and beneficiaries especially in situations 
outside of the full VFC Program application process.
(c) Requirements for the Self-Correction Component--Sections 
5(b)(3)(ii), 7.1(b)(2)(i)
    As with the current VFC Program application-based procedure for 
delinquent participant contribution transactions in section 7.1(a), 
correction amounts under the SCC consist of the (1) Principal Amount 
and (2) Lost Earnings, with the Principal Amount being the amount of 
participant contributions or loan repayments that would have been 
contributed to the plan if the employer had not retained such amounts 
and the Lost Earnings being the amount of earnings that would have been 
earned on the Principal Amount but for the failure to timely remit such 
amounts to the plan.
    The SCC requires that Lost Earnings be paid from the ``Date of 
Withholding or Receipt,'' and mandates the use of the online calculator 
to determine the amount of the loss payable to the plan. The term 
``Date of Withholding or Receipt'' means the date the amount would 
otherwise have been payable to the participant in cash in the case of 
amounts withheld by an employer from a participant's wages, or the date 
on which the participant contribution or loan payment is received by 
the employer in the case of amounts that a participant or beneficiary 
pays to an employer. The calculation of Lost Earnings from the Date of 
Withholding or Receipt is a special rule for purposes of the SCC and 
differs from the calculation of Lost Earnings under the full VFC 
Program application process, which begins on the earliest date on which 
the participant contributions or loan repayments could reasonably have 
been segregated from the employer's general assets (i.e., the date on 
which the contributions become plan assets under the Department's 
regulation at 29 CFR 2510.3-102). Use of the earlier date and the use 
of the online calculator are important elements of the SCC that are 
intended to help ensure full correction without the need for the 
protections afforded by the Program's otherwise applicable application 
and Department approval process. These elements also will provide self-
correctors with certainty that the calculation of Lost Earnings will 
meet the requirements of the SCC.
(d) Self-Correction Component Notice Requirement--Section 
7.1(b)(2)(iii)
    Section 7.1(b)(2)(iii) of the SCC sets forth a requirement for an 
electronically filed notice (SCC notice) in place of the generally 
applicable paper application requirements in section 7.1(a)(3) of the 
Program. The required data elements in the SCC notice include: the name 
and an email address for the self-corrector; the plan name; the plan 
sponsor's nine-digit employer identification number (EIN) and the 
plan's three-digit number (PN); the Principal Amount; the amount of 
Lost Earnings and the date paid to the plan; the Loss Date (for 
purposes of the SCC, the Date(s) of Withholding or Receipt); and the 
number of participants affected by the correction. The SCC notice must 
be submitted electronically to EBSA using a new online VFC Program web 
tool located on EBSA's website. Self-correctors using the web tool will 
receive an automatic EBSA email acknowledging the SCC notice 
submission.
    Several commenters asserted that the SCC notice requirement would 
discourage plan sponsors from using the SCC, although one commenter 
acknowledged it would not appear to impose a significant burden. 
Commenters also stated that the SCC notice was unnecessary because 
delinquent contributions and delinquent loan repayments are already 
reported on the Form 5500. Another commenter observed that self-
correction under the IRS's EPCRS does not require notice to the 
Internal Revenue Service (IRS), while another commenter proposed a 
minimum dollar threshold before there would be a requirement for the 
completion of the SCC notice. However, as discussed above, another 
commenter expressed concern that any elimination of notices or official 
approvals can leave open doors for abuse and create the impression that 
no one is monitoring the system.
    As noted in the preamble to the 2022 VFC Program proposed 
revisions, EBSA has been reluctant to adopt overbroad self-correction 
features because of the danger that it would have insufficient 
information regarding the breach and correction for which it is 
providing no-action relief. The decision to adopt the SCC is premised, 
however, on a conclusion that a well-designed self-correction feature 
can result in the Department receiving sufficient timely information to 
meet oversight objectives and ensuring appropriate corrections while 
also encouraging more Plan Officials to utilize the Program. In the 
Department's view, a well-designed program requires parties to file the 
basic data that is necessary for the Department to ensure adequate 
corrections, and appropriate oversight and accountability for fiduciary 
violations. Further, although EBSA supports appropriate harmonization 
of VFC Program provisions with the IRS's EPCRS when dealing with 
corrections of the same transaction, the Department does not believe 
that the SCC needs to match the requirements under the Self-Correction 
Program (SCP) of the IRS's EPCRS in every respect.\11\ In addition, 
EBSA does not believe reporting delinquencies and corrections on the 
Form 5500 or Form 5500-SF is an adequate alternative to the SCC notice. 
The SCC notice is intended to provide a relatively contemporaneous 
report of the delinquency being corrected. Reporting delinquencies and 
corrections on the Form 5500 or Form 5500-SF may not happen until many 
months after the delinquency has been corrected. For example, a 
delinquency that occurs in January of a calendar year plan would not be 
reported until the end of July or, with a generally available 
extension, until the middle of October of the following year. EBSA, 
accordingly, has decided to retain the SCC notice and electronic filing 
requirements as proposed.
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    \11\ Unlike the IRS program, the SCC includes PTE 2002-51, which 
provides an exemption from the prohibited transaction excise tax for 
certain transactions identified in the VFC Program.
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(e) Self-Correction Component ``Retention Record Checklist''--Penalty 
of Perjury Statement--Sections 6.2(d), 6.2(e) and 7.1(b)
    Self-correctors under the SCC in section 7.1(b) must prepare or 
collect the documents listed in the SCC Retention Record Checklist, 
printed below in appendix F, and provide the completed checklist and 
required documentation to the plan administrator as required under 
sections 6.2(d) and 7.1(b)(3). Also, to participate in the SCC, a plan 
fiduciary with knowledge of the transaction that is being self-
corrected and each Plan Official seeking relief under the program must 
sign a penalty of perjury statement as follows: ``Under penalties of 
perjury I certify that I am not Under Investigation (as defined in 
section 3(b)(3) of the VFC Program) and that I have reviewed the SCC 
notice acknowledgment and summary, the checklist, and all the required 
documentation, and to the best of my knowledge and belief the contents 
are

[[Page 4196]]

true, correct, and complete.'' The penalty of perjury statement also 
appears in Appendix F.\12\
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    \12\ As discussed below, the Department made a change in this 
2025 VFC Program to permit an employer in a multiemployer plan or 
multiple employer plan who wishes to correct on its own behalf to 
sign the application or SCC penalty of perjury statement and, 
regardless of the employer's status as a plan fiduciary, the penalty 
of perjury statement need not be signed by another plan fiduciary. 
See sections 6.1 and 6.2.
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    One commenter opposed the penalty of perjury requirement on the 
basis that it may have a chilling effect on utilization of the SCC and 
may increase litigation risk against Plan Officials. However, since its 
inception in 2002, the VFC Program has required a penalty of perjury 
statement as a necessary safeguard.\13\ As noted in the 2006 Program, 
EBSA believes that an important result under the Program is a level of 
certainty that those using the Program have complied with the terms of 
the Program and have revealed the details of the transaction and the 
correction.\14\ The penalty of perjury statement is part of what 
provides that level of certainty. Accordingly, the final SCC in section 
7.1(b) retains the penalty of perjury statement as a fundamental part 
of the Program.
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    \13\ 67 FR 15062, 15068, (March 28, 2002).
    \14\ 71 FR 20262, 20265 (April 19, 2006).
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(f) Self-Correction Component Protections and Frequency of Use
    In the preamble to the 2022 VFC Program proposed revisions, the 
Department stated that it had considered but did not include a limit on 
the frequency with which a self-corrector may use the SCC.\15\ The 
Department explained that it intended instead to monitor participation 
for frequent use of the SCC and that it may communicate with repeat 
users or open investigations to identify and correct systemic issues 
leading to repeated failures to transmit participant contributions in a 
timely fashion. The Department requested comments on whether the SCC 
should incorporate other protections for pension plans that are 
classified as small based on their participant population. For example, 
EBSA asked whether the SCC should limit small plan participation to 
only those small plans whose plan sponsors comply with the safe harbor 
standard in 29 CFR 2510.3-102(a)(2) for the timely handling of 
participant contributions. The Department noted that compliance could 
require, for example, either an existing practice or an agreement to 
put in place a customary practice of depositing participant 
contributions and loan payments with the plan not later than the 7th 
business day following the day on which such amount would otherwise 
have been payable to the participant in cash in the case of amounts 
withheld by an employer from a participant's wages, or the 7th business 
day following the day on which the participant contribution or loan 
payment is received by the employer in the case of amounts that a 
participant or beneficiary pays to an employer.
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    \15\ The proposal noted that the class exemption PTE 2002-51 is 
generally unavailable to VFC Program applicants that have, within 
the previous there years, taken advantage of the relief provided by 
the VFC Program and the exemption for a similar type of transaction. 
Comments were solicited on whether to eliminate the three-year use 
limitation in the exemption PTE 2002-51. A discussion of that issue 
and the Department's conclusion can be found in the final amendment 
to PTE 2002-51 which appears in this issue of the Federal Register.
---------------------------------------------------------------------------

    Commenters generally supported the decision not to impose a limit 
on the frequency of use of the SCC. One commenter believed that, given 
the Lost Earnings cap, repeat use of the SCC is unlikely to present a 
risk to participants. Another commenter argued that plan sponsors will 
be disincentivized from using the SCC if their frequency of use is 
monitored by EBSA and asked for guidance as to the level of usage that 
is likely to generate follow-up inquiries from EBSA. Commenters also 
asked that no additional requirements be imposed on self-corrections by 
small plans. They argued additional requirements were unnecessary 
because the Department retains the right to investigate a plan 
fiduciary if it fails to meet the SCC requirements and additional 
requirements could discourage participation in the SCC. One commenter 
argued that in its experience most small employers followed the 7-
business day safe harbor, but a more restrictive standard in the SCC 
would fail to acknowledge that there are occasions when a particular 
deposit cannot be reasonably segregated from the employer's general 
assets within the 7-business day period. The Department has decided not 
to adopt additional requirements for small plans at this time. As 
discussed in the preamble to the 2022 VFC Program proposed revisions, 
EBSA will monitor the use of the SCC and evaluate the potential merit 
of added requirements based on that data.
    With respect to the request for guidance on the level of repeat 
usage of the SCC that might trigger communications from the Department 
or initiation of an investigation, the Department does not believe a 
general standard would be appropriate for determining whether repeated 
use of the SCC will generate an inquiry or investigation. Rather, the 
Department's actions with respect to any particular repeat user will 
depend on the facts and circumstances of the individual corrections.
(g) Self-Correction Component: Miscellaneous
    The VFC Program does not relieve plans from reporting delinquent 
participant contributions on the plan's Form 5500 or Form 5500-SF, as 
applicable. That remains the case under these amendments to the Program 
for violations, regardless of whether corrected under the SCC or the 
application-based component of the VFC Program.
    A commenter urged the Department to provide guidance on whether and 
how plan administrators should report use of the SCC on the Form 5500 
(Line 4a of the Schedule H or Schedule I for small plans; line 9(a) of 
the Schedule DCG) or Form 5500-SF (Line 10a). The instructions for the 
Form 5500 and the Form 5500-SF already specifically address reporting 
of delinquent contributions. EBSA directs filers to the instructions 
for the Form 5500 to determine their reporting obligation regarding 
delinquent participant contributions. The information submitted on the 
SCC notice enables the Department to cross-reference SCC correctors to 
the Form 5500/5500-SF data. The Department has a project on its 
regulatory agenda that involves an evaluation of general improvements 
to the annual reporting forms and instructions. The Department is open 
to input on that project from stakeholders related to whether the 
Department should propose adding questions to the Form 5500 and Form 
5500-SF that specifically relate to use of the SCC.
    In the 2006 VFC Program, the Department rejected a recommendation 
that EBSA implement a de minimis rule under the VFC Program under which 
applicants would not be required to correct a previously filed Form 
5500 in circumstances where the breach involved a defined de minimis 
threshold amount of the plan's assets.\16\ EBSA continues to believe 
that such an exception from the requirement to file a complete and 
accurate annual report is not appropriate. Rather, when a prohibited 
transaction is not reported or is reported incorrectly on the plan's 
Form 5500 or Form 5500-SF annual report, the Form 5500 or Form 5500-SF 
filing must be amended so the plan's annual report correctly reflects 
the fiduciary breach and prohibited transaction.
---------------------------------------------------------------------------

    \16\ 71 FR 20262, 20266 (2006).

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[[Page 4197]]

    Another commenter recommended that the Department create an online 
excise tax calculator in coordination with the Department of the 
Treasury. A requirement for the use of the SCC under section 
7.1(b)(2)(i) is that the Lost Earnings on the delinquent remittance of 
participant contributions and participant loan repayments be calculated 
using the online calculator. This requirement was supported by 
commenters as a straightforward method to determine the Lost Earnings 
amount. The Department will consider the recommended addition and 
consult with the Department of the Treasury, but believes that step is 
beyond the scope of the current amendments and is not prepared to adopt 
such an expansion of the online calculator concurrent with this 
release.

2. Self-Correction Component for Participant Loan Transactions 
Corrected Pursuant to IRS's EPCRS--Section 7.3

    The current VFC Program covers certain participant loans that fail 
to qualify for ERISA's statutory exemption for plan loan programs in 
ERISA section 408(b)(1). Specifically, these covered loan transactions 
are loans in which the terms of the loan did not comply with plan 
provisions that incorporated requirements of section 72(p) of the Code 
concerning amount, duration, or level amortization, or which defaulted 
due to a failure to withhold loan repayments from the participant's 
wages. The correction under the 2006 VFC Program for these transactions 
requires that the Plan Official voluntarily correct the loan with IRS 
approval under the Voluntary Correction Program (VCP) of the IRS's 
EPCRS and provide to the Department information regarding the 
correction.
    In July 2021, IRS updated EPCRS to permit use of SCP for correction 
of certain participant loan failures. In December 2022, the SECURE 2.0 
Act was enacted. Section 305(b)(1) of the SECURE 2.0 Act provides that 
an ``eligible inadvertent failure'' related to a loan from a plan to a 
participant may be self-corrected according to the rules of section 
6.07 of Revenue Procedure 2021-30 or any successor guidance.
    Section 305(b)(2) of the SECURE 2.0 Act requires the Department to 
treat eligible inadvertent failures related to participant loans that 
are self-corrected under the IRS's EPCRS as described above as meeting 
the requirements of the VFC Program ``if, with respect to the violation 
of the fiduciary standards of the Employee Retirement Income Security 
Act of 1974, there is a similar loan error eligible for correction 
under the IRS's EPCRS and the loan error is corrected in such manner.'' 
Section 305(b)(3) of the SECURE 2.0 Act permits the Department to 
impose reporting or other procedural requirements with respect to 
parties that intend to rely on the VFC Program for correction of these 
eligible inadvertent failures.
    The 2022 VFC Program proposed revisions were published for public 
comment in November 2022 before the SECURE 2.0 Act was enacted, with a 
comment period closing date of January 20, 2023. Some commenters 
addressed SECURE 2.0 Act section 305 during that comment period. 
However, because the amendments were published for public comment 
before the SECURE 2.0 Act was enacted, the Department reopened the 
comment period from February 14 to April 17, 2023, to specifically 
solicit comments on the SECURE 2.0 Act section 305 directive. In the 
notice reopening the comment period, the Department asked specific 
questions about section 305 of the SECURE 2.0 Act, including (i) 
whether VFC Program section 7.3 should be amended to include a 
paragraph treating participant loan transactions self-corrected under 
the IRS's EPCRS as meeting the requirements of the VFC Program, (ii) 
whether the VFC Program should impose additional reporting or other 
procedural requirements for these specific corrections, and (iii) 
whether changes were needed to PTE 2002-51.
    Several commenters expressed general support for the implementation 
of the changes required by the SECURE 2.0 Act section 305, including 
support for adding a self-correction component to the VFC Program for 
participant loans self-corrected in accordance with the SCP of the 
IRS's EPCRS. The commenters urged the Department to remove requirements 
in section 7.3 of the VFC Program that correctors must use VCP (under 
the IRS's EPCRS) and that they must provide the Department with proof 
of payment and an IRS compliance statement. A commenter further 
recommended amending section 2 of the VFC Program to provide that EBSA 
will not initiate a civil investigation or assess civil penalties for 
participant loan transactions corrected under the SCP of the IRS's 
EPCRS.
    Several commenters stated that the Department should not impose any 
requirements on parties who self-correct plan loans under the VFC 
Program beyond what is required by the SCP of the IRS's EPCRS. The 
commenters noted that the SCP of the IRS's EPCRS does not impose notice 
or reporting requirements for employers that self-correct. One 
commenter stated that consistency between the IRS's EPCRS and the 
Department's VFC Program would simplify corrections and reduce burden. 
A different commenter stated that reporting to EBSA or other procedural 
requirements are unnecessary because a plan loan that is self-corrected 
under the SCP of the IRS's EPCRS puts the affected participants in the 
position they would have been if no failure occurred. One commenter 
recommended that the Department also include other ``eligible 
inadvertent failures'' (i.e., eligible inadvertent failures other than 
those relating to loans to participants) in a VFC Program self-
correction component as soon as practicable after the IRS provides 
guidance on the meaning of ``eligible inadvertent failures'' and how 
such failures can be self-corrected under EPCRS.
    After evaluating the comments, and pursuant to section 305 of the 
SECURE 2.0 Act, the Department is modifying section 7.3 of the VFC 
Program to accept EPCRS self-corrections of eligible inadvertent 
failures of participant loan transactions. Specifically, the 2025 VFC 
Program adds a new self-correction component in section 7.3(c) entitled 
``Eligible Inadvertent Participant Loan Failures Corrected under the 
Self-Correction Component.''
    The description of the transaction set forth in section 7.3(c)(1) 
states, ``A plan extended a loan to a plan participant who is a party 
in interest with respect to the plan based solely on their status as an 
employee of any employer whose employees are covered by the plan, as 
defined in section 3(14)(H) of ERISA. There is an Eligible Inadvertent 
Participant Loan Failure that involves a Breach as defined in section 
3(b)(1) [of the VFC Program].'' Section 7.3(c) further provides that an 
Eligible Inadvertent Participant Loan Failure is a participant loan 
failure that occurs despite the existence of practices and procedures 
that satisfy the standards set forth in, and is eligible for correction 
under, the IRS's EPCRS, and does not include any participant loan 
failure that is egregious, relates to the diversion or misuse of plan 
assets, or is directly or indirectly related to an abusive tax 
avoidance transaction. In addition, in connection with the new 
provision in section 7.3(c), a new exception is added to section 4 
titled ``Exception for Eligible Inadvertent Participant Loan Failures'' 
to clarify that a self-corrector is eligible to correct an Eligible 
Inadvertent Participant Loan Failure under section 7.3(c) even if the 
plan or the self-corrector is ``Under Investigation,'' within the 
meaning of the VFC Program so long as the self-corrector is eligible to 
correct the

[[Page 4198]]

participant loan failure under the IRS's EPCRS.\17\
---------------------------------------------------------------------------

    \17\ Under Q&A-4 of Notice 2023-43, once a plan or plan sponsor 
comes under examination (as defined in section 5.08 of Rev. Proc. 
2021-30), an Eligible Inadvertent Participant Loan Failure is no 
longer eligible for self-correction under the IRS's EPCRS unless the 
plan sponsor has, before the plan or plan sponsor comes under 
examination, demonstrated a specific commitment to implement a self-
correction. However, under Q&A-5 of Notice 2023-43, a plan sponsor 
may self-correct an Eligible Inadvertent Participant Loan Failure 
that is insignificant, determined in accordance with the factors set 
forth in section 8.02 of Rev. Proc. 2021-30, even if the plan or 
plan sponsor is under examination, and even if the failure is 
discovered on examination.
---------------------------------------------------------------------------

    The new SCC for participant loan failures in section 7.3(c) 
accordingly allows self-correction of transactions currently described 
in section 7.3(a) and (b) of the VFC Program--i.e., loans the terms of 
which did not comply with plan provisions that incorporated 
requirements of section 72(p) of the Code concerning amount, duration, 
or level amortization, or loans that defaulted due to a failure to 
withhold loan repayments from the participant's wages--if such 
transactions are eligible for, and have been self-corrected under, the 
IRS's EPCRS. The new SCC in section 7.3(c) also extends to the failure 
to obtain spousal consent for a plan loan and to allowing a loan when 
the loan exceeds the number permitted under the terms of the plan, also 
provided that the transactions are eligible for, and have been self-
corrected under, the IRS's EPCRS.
    IRS Notice 2023-43 (IRS Notice) provides interim guidance under 
section 305 of the SECURE 2.0 Act with respect to the expansion of 
EPCRS, including with respect to the expansion of self-correction for 
eligible inadvertent failures relating to loans from plans to 
participants under section 305(b)(1).\18\ Among other things, the IRS 
Notice provides that plan sponsors may self-correct any eligible 
inadvertent failure relating to a loan from a plan to a participant 
that is corrected in accordance with section 6.07 of EPCRS, before 
EPCRS is formally updated pursuant to section 305(g) of the SECURE 2.0 
Act, if certain conditions are satisfied.\19\ The IRS Notice also 
provides that plan sponsors may rely on the notice beginning on the 
date it was issued, May 25, 2023, and ending on the date EPCRS is 
updated pursuant to section 305(g) of the SECURE 2.0 Act. Likewise, 
with respect to the new SCC in section 7.3(c), the Department will 
accept self-correction in accordance with section 6.07 of the IRS's 
EPCRS before EPCRS is formally updated. Once the IRS's EPCRS is 
formally updated, the Department will accept self-correction in 
accordance with the updated EPCRS. In this regard, with respect to a 
failure to obtain spousal consent for a plan loan, the Department's SCC 
will initially accept only a correction that involves obtaining spousal 
consent, unless and until additional correction methods are identified 
in an updated IRS's EPCRS.\20\ The Department intends to monitor use of 
the SCC as well as any additional changes to the IRS's EPCRS to 
determine whether additional guidance appears necessary on the scope of 
the SCC in section 7.3(c) or on any correction methods.
---------------------------------------------------------------------------

    \18\ Notice 2023-43, Guidance on Section 305 of the SECURE 2.0 
Act of 2022 with Respect to Expansion of the Employee Plans 
Compliance Resolution System, available at https://www.irs.gov/pub/irs-drop/n-23-43.pdf.
    \19\ Id. at Q&A 1.
    \20\ See section 6.07(4) of Revenue Procedure 2021-30 (relating 
to correction of failure to obtain spousal consent for plan loan).
---------------------------------------------------------------------------

    The Department does not agree with the commenters who suggested 
that the Department should not impose any requirements in the VFC 
Program on parties who self-corrected participant loans beyond what is 
required by the IRS's EPCRS. Rather, similar to the Department's 
position described above with respect to self-correction of delinquent 
participant contributions and loan repayments, the Department believes 
self-correction of participant loan transactions is a new approach that 
merits a level of oversight to ensure that transactions are adequately 
corrected and that breaching fiduciaries have an appropriate level of 
accountability. Accordingly, under section 7.3(c), self-correctors are 
required to complete a SCC notice and submit the notice electronically 
to EBSA using the online VFC Program web tool located on EBSA's 
website. Self-correctors are also required to complete and retain the 
documents required under section 6.2 (including the Penalty of Perjury 
Statement). The SCC for participant loan transactions has been designed 
so that the burden of providing information to the Department is 
minimal and mirrors the IRS recordkeeping requirements \21\ by 
requiring only contact information, a short description of type of 
participant loan failure, the loan amount or amounts in the case of 
multiple loans, the date the failure was identified, the date or dates 
of correction, the correction, and the number of participants affected 
by the correction. Unlike self-correctors under section 7.1(b), who 
must complete a SCC Record Retention Checklist, self-correctors under 
section 7.3(c) do not need to complete that checklist.
---------------------------------------------------------------------------

    \21\ Notice 2023-43, at Q&A-11.
---------------------------------------------------------------------------

    The existing correction method under sections 7.3(a) and (b) are 
retained to permit those that would prefer to correct under the EPCRS 
VCP to utilize the application-based process under the VFC Program.
    The Department also does not agree with the suggestion that section 
2 be amended to provide that EBSA will not initiate a civil 
investigation or assess civil penalties for a self-correction of a 
participant loan failure corrected under the IRS's EPCRS. Consistent 
with EBSA's historical practice under the VFC Program, the Department 
generally does not anticipate taking enforcement action in response to 
a compliant application or eligible self-correction except in the 
unusual situation where EBSA becomes aware of possible criminal 
behavior, material misrepresentations or omissions in the VFC Program 
application or SCC notice, or other abuse of the Program.\22\
---------------------------------------------------------------------------

    \22\ 67 FR 15062, 15063 (2002).
---------------------------------------------------------------------------

3. Other Revisions to the VFC Program

(a) Revisions to Application Process Provisions for Delinquent 
Participant Contributions--Sections 7.1(a), (c) and (d)
    Section 7.1(a) has been renamed ``Delinquent Participant 
Contributions and Loan Repayments to Pension Plans under VFC Program 
Applications'' to clarify that it applies only to corrections pursuant 
to Program applications in contrast to self-corrections under section 
7.1(b). Additionally, section 7.1(a) has been revised to reflect the 
Department's amendment of its regulation defining plan assets in 2010 
to include participant loan repayments within these regulatory 
principles.\23\ Language has also been added to sections 
7.1(a)(3)(ii)(A) and (iii)(A) to explain that the required narrative in 
the application must include a description of any steps taken to 
prevent future delinquencies.
---------------------------------------------------------------------------

    \23\ See 29 CFR 2510.3-102(a)(1).
---------------------------------------------------------------------------

    Sections 7.1(b) ``Delinquent Participant Contributions to Insured 
Welfare Plans'' and (c) ``Delinquent Participant Contributions to 
Welfare Plan Trusts'' are re-designated as sections 7.1(c) and (d) 
respectively. A change also has been made to each of these sections to 
clarify that the participant contributions were remitted to the 
insurance provider in section 7.1(c)(3)(iii) and to the trust in 
section 7.1(d)(3)(ii) rather than the plan as previously stated to 
clarify the provision.

[[Page 4199]]

    The Department also had proposed deleting language regarding 
Restoration of Profits as a correction method under sections 
7.1(a)(2)(i) and (ii) and 7.1(d)(2)(i) and (ii). The proposal was based 
on the view that this correction method may be unnecessary in this 
context, as applicants had not reported generating a profit through use 
of the delinquent amounts, and therefore, deletion would simplify the 
Program. Although the Department did not receive comments opposing 
these changes, the Department determined to retain Restoration of 
Profits as a potential correction method in the 2025 VFC Program in 
order to leave the option available should it become relevant to an 
applicant in the future. Many commenters on the 2022 VFC Program 
proposed revisions generally supported expansive availability of the 
Program to promote timely correction of errors.
    The 2022 VFC Program proposed revisions also clarified that the VFC 
Program does not include a correction for delinquent matching employer 
contributions. However, as explained in the notice, to the extent that 
a Program application provides that the employer will apply the same 
correction formula to the employer matching contributions that it is 
required to apply to delinquent participant contributions, EBSA does 
not expect to reject or refuse to process such applications merely 
because delinquent employer matching contributions are included even 
though the ``correction'' of the employer contribution is not a covered 
transaction under the VFC Program, is not entitled to any relief under 
the Program, and will not be covered by any no action letter.
(b) Revisions to Application Process Provisions for Loans--Sections 
7.2(b), (c) and (d)
    The 2022 VFC Program proposed revisions included several changes to 
section 7.2 related to the application process for correction of 
certain plan loans made at below-market interest rates. The Department 
received no comments on the proposed revisions, and as described below, 
is adopting the changes as proposed.
    The original VFC Program included as an eligible transaction ``Loan 
at Below-Market Interest Rate to a Party in Interest with Respect to 
the Plan.'' The corrective action in section 7.2(b) for such 
transactions requires the payment of the loan in full, plus penalties, 
and the greater of the Lost Earnings or Restoration of Profits. In 
addition to the required section 6.1 documentation, the 2006 VFC 
Program required applicants to provide both a written copy of an 
independent commercial lender's fair market interest rate determination 
under section 7.2(b)(3)(ii) and a copy of an independent fiduciary's 
dated, written approval of the fair market interest rate determination 
under section 7.2(b)(3)(iii). To reduce applicants' costs, the 2025 VFC 
Program revises section 7.2(b)(3)(iii) to eliminate the requirement 
that an independent fiduciary validate in writing the process used to 
determine the fair market interest rate determination for loans in the 
amount of $10,000 or less. The 2025 VFC Program also clarifies the 
wording in section 7.2(b)(3)(i) to require a narrative describing the 
process used to determine the interest rate at the time the loan was 
made.
    Section 7.2(c) ``Loan at Below-Market Interest Rate to a Person Who 
is Not a Party in Interest With Respect to the Plan'' is also a 
transaction that dates from the original VFC Program. Sections 
7.2(c)(2)(i) and (ii) are being re-organized to clarify the required 
correction for this transaction. Section 7.2(c)(2)(ii) also adds an 
alternative to payment of the present value of the Principal Amounts 
from the Recovery Date to the loan's maturity date. The present value 
payment method must be coupled with the borrower's continued payment of 
the outstanding loan balance under the original repayment schedule for 
the duration of the loan. The new alternative permits the borrower's 
payment of the amortized outstanding loan balance over the remaining 
payment schedule of the loan at the interest rate that would have been 
applicable if the loan had originally been made at the fair market 
interest rate. When this new alternative is used, the applicant must 
submit a copy of the loan repayment schedule for the re-amortized loan 
repayments under section 7.2(c)(3)(iii). Any fair market interest rate 
must be determined by an independent commercial lender. The wording in 
section 7.2(c)(3)(i) is revised in a similar fashion to the wording in 
section 7.2(b)(3)(i) to require a narrative describing the process used 
to determine the interest rate at the time the loan was made.
    Section 7.2(d) ``Loan at Below-Market Interest Rate Solely Due to a 
Delay in Perfecting the Plan's Security Interest'' is another 
transaction dating back to the original VFC Program. It provides a 
correction for when a plan made a purportedly secured loan to a non-
party in interest, but a delay occurred in recording or otherwise 
perfecting the plan's interest in the loan collateral, resulting in the 
loan being treated as an unsecured loan until the plan's security 
interest was perfected. Section 7.2(d)(2) is re-organized to clarify 
the correction. Section 7.2(d)(2)(ii) specifically requires that the 
plan's interest in the loan collateral be recorded or perfected. For 
situations where the delay in perfecting the loan's security caused a 
permanent change in the risk characteristics of the loan, section 
7.2(d)(2)(iii) requires the payment of the present value of the 
remaining Principal Amounts from the date the loan is fully secured to 
the maturity date of the loan. The 2025 VFC Program clarifies that the 
present value payment method must be coupled with the borrower's 
continued payment of the outstanding loan balance under the original 
repayment schedule for the duration of the loan. Section 7.2(d)(2)(iii) 
is also being amended in the 2025 VFC Program to add an alternative 
that permits the borrower's payment of the amortized outstanding loan 
balance over the remaining payment schedule of the loan at the interest 
rate that would have been applicable for a loan with the changed risk 
characteristics. When this new alternative in the 2025 VFC Program is 
used, the applicant must submit a copy of the loan repayment schedule 
for the re-amortized loan repayments under section 7.2(d)(3)(iii). Any 
fair market interest rate must be determined by an independent 
commercial lender.
    In a related modification applicable to these three types of loans, 
section 5(a) is revised to include a specific explanation in section 
5(a)(5) for when a commercial lender will be ``independent'' using the 
same criteria as is used to determine the ``independence'' of an 
appraiser. As an ongoing protection for plans and their participants, 
EBSA staff, as part of the application review process, will continue to 
monitor a commercial lender's interest rate determination process and 
will object if it appears that a lender is not truly ``independent'' of 
the plan's fiduciaries and parties in interest, or the interest rate 
determination process is otherwise flawed.
(c) Revisions to Application Process Provisions for Purchases, Sales 
and Exchanges, Sales and Leasebacks--Section 7.4
    The 2022 VFC Program proposed revisions included several changes to 
Section 7.4(a) ``Purchase of an Asset (Including Real Property) by a 
Plan from a Party in Interest,'' Section 7.4(b) ``Sale of an Asset 
(Including Real Property) by a Plan to a Party in Interest,'' and 
Section 7.4(c) ``Sale and Leaseback of Real Property to Employer.'' The 
Department did not receive any

[[Page 4200]]

comments on the proposed revisions, and as described below, is adopting 
the changes as proposed.
    Section 7.4(a) provides a method of correction for situations when 
the plan purchased an asset (including real property) from a party in 
interest in a transaction to which no prohibited transaction exemption 
applies. A plan's purchase from a party in interest can be corrected 
under the VFC Program by reversing the transaction provided the plan 
receives the higher of the fair market value at resale or the Principal 
Amount plus the greater of either Lost Earnings or Restoration of 
Profits.\24\ As an alternative correction, a plan may retain the asset 
plus receive an amount resulting from application of a formulaic 
calculation, but only if an independent fiduciary determines that the 
plan will realize a greater benefit from this alternative correction 
than from the resale of the asset. Section 7.4(a)(2) of the 2025 VFC 
Program includes a new paragraph (iii) that provides a third method of 
correction in situations when the purchase cannot be reversed or the 
asset retained because the plan no longer owns the asset (e.g., sales, 
maturity, destruction). Under this new correction, the plan can receive 
a ``cash settlement'' if the asset has been sold and a Plan Official 
provides a statement, as required by section 7.4(a)(3)(v), that the 
sale was upon the advice of an independent fiduciary and not in 
anticipation of applying for relief under the Program. The 
determination of the cash settlement amount is prescribed in section 
7.4(a)(2)(iii) and considers, among other factors, whether the plan 
realized a profit on the resale of the asset, or a loss on the resale, 
maturity or destruction of the asset.
---------------------------------------------------------------------------

    \24\ The terms Principal Amount, Lost Earnings, and Restoration 
of Profits are defined in VFC Program section 5.
---------------------------------------------------------------------------

    As a further clarifying change, the wording in section 
7.4(a)(2)(ii) is modified to permit the subtraction of any earnings 
received on the asset up to the Recovery Date from Lost Earnings.
    The 2025 VFC Program also includes an amendment to section 7.4(b) 
``Sale of an Asset (Including Real Property) by a Plan to a Party in 
Interest.'' Section 7.4(b) provides a method of correction in 
situations when the plan sold an asset for cash to a party in interest 
in a transaction to which no prohibited transaction exemption applies. 
The amendment adds a condition to the section 7.4(b)(2)(ii) correction 
to permit the plan to receive the correction amount rather than to 
repurchase the asset by permitting a Plan Official to determine that 
the asset cannot be repurchased (e.g., destruction, maturity). This new 
condition in section 7.4(b)(2)(ii) is an alternative to the section's 
existing condition requiring an independent fiduciary to determine that 
the plan will recognize a greater benefit from this correction than the 
correction in section 7.4(b)(2)(i). As part of the required 
documentation under section 7.4(b)(3)(iv), the Plan Official making 
this determination must provide a written explanation of why the asset 
cannot be repurchased.
    Section 7.4(c) ``Sale and Leaseback of Real Property to Employer'' 
provides a method of correction for a plan sponsor that sells a parcel 
of real property to the plan, which is then leased back to the plan 
sponsor and is not otherwise exempt. To more accurately reflect the 
statutory exemption provided by ERISA section 408(e), which does not 
limit the transaction to the plan sponsor, section 7.4(c) is being 
revised to explicitly allow correction of leases to affiliates of the 
plan sponsor. The final associated class exemption, PTE 2002-51, has 
been revised for consistency with this amendment.
(d) Revisions to Application Process Provisions for Illiquid Assets--
Section 7.4(f)
    The VFC Program includes correction for a transaction that permits 
a plan to divest, rather than continue to hold in its investment 
portfolio, a previously purchased asset that is determined to be 
illiquid and that had been acquired under circumstances described in 
the Program. The 2022 VFC Program proposed revisions retained those 
circumstances, as well as the correction method, which permits the sale 
of the asset to a party in interest provided the plan receives the 
higher of (A) the fair market value of the asset at the time of resale, 
without a reduction for the costs of sale; or (B) the Principal Amount, 
plus Lost Earnings as described in section 5(b). This correction 
encompasses a sale of the illiquid asset to a party in interest by the 
plan even if the original purchase of the asset by the plan was not a 
prohibited transaction or otherwise imprudent. However, the amendments 
modified the definition of Principal Amount to take into account the 
possibility that the transaction being corrected was neither a 
prohibited transaction nor a fiduciary breach. Section 7.4(f)(2)(ii) 
now defines Principal Amount as either the amount that would have been 
available had the Breach not occurred, or the plan's original purchase 
price if the original purchase was not a prohibited transaction or 
imprudent. The amendments also clarify that in the case of an illiquid 
asset that is a parcel of real estate, no party in interest may own 
real estate that is contiguous to the plan's parcel of real estate on 
the Recovery Date. There were no comments addressing these proposed 
revisions, and the 2025 VFC Program includes these changes as proposed.
(e) Revisions to the VFC Program General Eligibility Criteria--Sections 
3, 4, and 5
(i) Under Investigation Definition--Section 3(b)(3)
    To be eligible to correct under the VFC Program, a plan, applicant, 
or self-corrector may not be ``Under Investigation'' as defined in 
section 3(b)(3). The 2022 VFC Program proposed revisions included a 
modification to section 3(b)(3)(i) to state that a review by an EBSA 
Benefits Advisor is considered an investigation by EBSA that 
automatically makes an applicant or self-corrector ineligible to 
participate in the Program. However, the proposed change to section 
3(b)(3) makes clear that a plan will not be considered to be Under 
Investigation merely because EBSA staff has contacted the plan, the 
applicant, the self-corrector, or the plan sponsor in connection with a 
participant complaint unless the participant complaint concerns the 
transaction described in the application or identified in the SCC 
notice and the plan has not received the correction amount due under 
the Program as of the date EBSA staff contacted the plan, the 
applicant, the self-corrector, or the plan sponsor.
    One commenter opposed including in the definition of Under 
Investigation contact from an EBSA staff member regarding a participant 
complaint arguing that the fiduciary may have not known the breach 
occurred until the fiduciary received the call from the EBSA staff 
member. The commenter further suggested that EBSA instead could put 
time parameters around when the fiduciary must act based on receiving 
information from the EBSA staff member.
    The VFC Program has limited eligibility for participation in the 
Program to plans and applicants that are not Under Investigation since 
its inception. The requirement does not turn on the fiduciary's 
knowledge of the breach (or allegations of a breach), but rather on the 
absence of an investigation by the Department. An important premise of 
the VFC Program is that fiduciaries should not wait to see if the 
agency has spotted the potential breach or if a participant has 
complained to the agency before they take action to correct

[[Page 4201]]

violations. Instead, they should timely correct violations, and the VFC 
Program should be structured to avoid incentives for fiduciaries to 
adopt a ``wait and see'' approach focused on the likelihood of getting 
caught, instead of the need to correct violations promptly. 
Accordingly, the Department is not persuaded that the changes suggested 
by the commenter are consistent with the purpose of the provision and, 
accordingly, declines to adopt the suggestions. Rather, the 2025 VFC 
Program retains the definition of Under Investigation as proposed.
(ii) Eligibility Exceptions--Section 4
    Section 4 of the Program provides that in order to be eligible for 
the VFC Program, the plan, applicant, or self-corrector may not be 
Under Investigation (discussed above) and the VFC Program application 
must contain no evidence of potential criminal violations. The 2025 VFC 
Program added two new limited exceptions to the existing eligibility 
requirements to promote increase usage of the Program.
    The first exception involves the ``potential criminal violations'' 
provision in paragraph (b)(2) and allows participation in the VFC 
Program by an innocent plan administrator, plan sponsor, or applicant 
for cases involving delinquent participant contributions and loan 
repayments when (1) all funds have been repaid to the plan; (2) the 
appropriate law enforcement agency has been notified of the alleged 
criminal activity; and (3) the applicant submits a statement (covered 
by the Penalty of Perjury Statement) with the application providing 
contact information for the law enforcement agency, certifying that the 
applicant was not involved in the alleged criminal activity, and 
reporting whether a claim relating to the potential criminal violation 
has been made under an ERISA section 412 fidelity bond. To accommodate 
this change, section 4(b) is re-named and re-designated as section 
4(b)(1), ``In general.'' EBSA always retains the right to reject any 
VFC Program application based on its review of the criminal activity 
involved.
    The second exception being added in the 2025 VFC Program is in 
section 4(d), which provides that an applicant is eligible to submit a 
``bulk application'' when certain conditions are met. As noted in the 
2022 VFC Program proposed revisions, over the past several years, EBSA 
has received Program applications from service providers to correct 
Breaches involving multiple plans. Some of these applications have 
involved hundreds, or even thousands, of plans, some of which are Under 
Investigation by EBSA. As noted elsewhere in this document, a plan is 
automatically ineligible to participate in the Program if it is 
considered ``Under Investigation'' as defined in section 3(b)(3) of the 
Program. Consequently, such plans could not be included in any 
resulting no action letter. EBSA noted that it would like to be able to 
issue a no action letter to the service provider that covers all plans 
named in the application in certain circumstances. EBSA received one 
comment letter in support of the changes described in the 2022 VFC 
Program proposed revisions, and the Program's eligibility provision 
have been expanded as proposed. Specifically, to qualify: (1) the 
application must cover at least ten named plans and each plan must have 
participated in the transaction being corrected; (2) the applicant must 
be a service provider that is applying for relief only on its own 
behalf; (3) the applicant is currently or was providing services to 
each of the named plans at the time of the transaction being corrected; 
and (4) the service provider cannot be Under Investigation by EBSA and 
the corrective action cannot have been taken as a result of an EBSA 
investigation or review of any named plan. EBSA retains the right to 
determine whether the corrective action was taken as a result of any 
investigation, and to exclude any plan involved in the investigation 
from the no action letter. Also, section 6.1(d)(3) is being amended to 
permit a bulk applicant to provide for each named plan either the 
Annual Report Form 5500 filing information or the plan sponsor's nine-
digit number (EIN). This procedural change will avoid undue delay while 
a service provider attempts to secure Annual Report Form 5500 filing 
information, which may not be directly related to the Breach. Section 
6.1(g) is also being amended to permit a bulk applicant with knowledge 
of the transaction that is the subject of the application to sign and 
date the Penalty of Perjury Statement in which the applicant certifies 
that it is not Under Investigation by EBSA instead of requiring a 
signature from a plan fiduciary for each plan covered by the 
application.
(iii) Lost Earnings De Minimis Exception--Section 5(e)
    The 2006 VFC Program provides a de minimis exception that applies 
to corrective distributions of less than $20 each to former employees, 
their beneficiaries, and alternate payees who neither have account 
balances with nor have a right to future benefits from the plan if the 
applicant demonstrates that the cost of making a distribution to the 
individual exceeds the amount of the corrective payment. In that case, 
the distribution does not have to be paid to the individuals but rather 
the total amount can be paid to the plan. The 2022 VFC Program proposed 
revisions included an increase in the de minimis amount to $35. Several 
commenters asked for a de minimis rule for Lost Earnings on delinquent 
remittance of participant contributions and participant loan repayments 
under which the correction would be limited to payment of the principal 
amount and there would not be an obligation to pay Lost Earnings to the 
participants or to the plan. The suggestion was not to be limited to 
former employees, their beneficiaries, and alternate payees who neither 
have account balances with nor have a right to future benefits from the 
plan. Some commenters argued that the costs of processing the 
corrective Lost Earnings payments should be avoided when the per 
participant amount is very small while other commenters proposed a 
total amount threshold of $50 or $75 on a per event basis before 
correction would have to include Lost Earnings. The Department is not 
persuaded that the de minimis amount should be increased above the $35 
amount in the proposal or that it should be expanded to include 
individuals with account balances or a right to future benefits from 
the plan. Rather, in the Department's view, a de minimis level for the 
VFC Program should reinforce, not undercut, the overarching obligation 
that plan sponsors and other Plan Officials who fail to follow the 
legal requirements (such as for depositing participant contributions 
and loan repayments) should make full correction to the plan and its 
participants and beneficiaries. Accordingly, the 2025 VFC Program 
retains the requirements in section 5(e) with the increase from $20 to 
$35.
(f) Payment of Correction and Correction Costs by Plan Officials
    Although section 7 of the VFC Program provides that any Plan 
Official may correct a breach in accordance with section 5 and the 
applicable correction method, section 7.1(a) through (d) provides that 
any penalties, late fees or other charges must be paid by the employer. 
Several commenters suggested that the VFC Program expressly allow 
service providers, as well as employers, to pay Lost Earnings on 
delinquent remittance of participant contributions and loan repayments. 
The commenters argued that in certain circumstances when the amount of 
the delinquent participant contributions and loan repayments are small, 
the cost

[[Page 4202]]

incurred by service providers to collect Lost Earnings from a plan 
sponsor or employer can exceed the amount of Lost Earnings. EBSA has 
decided to adopt this suggestion by modifying section 7.1(a) through 
(d) to better conform with section 5(b) by stating that the cost of the 
correction must be paid by a Plan Official and not from the employee 
contributions and loan repayments. This change is consistent with 
existing section 5(c) of the VFC Program which provides that the 
responsible fiduciary, plan sponsor or other Plan Official must pay 
correction amounts and any costs of correction and also prohibits 
payment of any part of the correction amount or costs of correction 
from plan assets. Plan Official is defined in section 3(b)(2) as a plan 
fiduciary, plan sponsor, party in interest with respect to a plan, or 
other person who is in a position to correct a breach by filing an 
application or submitting a SCC notice. Although the service providers 
may pay Lost Earnings amounts resulting from another Plan Official's 
breach, a proper VFC Program application or SCC notice, which includes 
the penalty of perjury statement by a plan fiduciary, must be completed 
or EBSA will not issue a no action letter or self-correction 
acknowledgment.
    In the 2022 VFC Program proposed revisions, the Department also 
stated that, with respect to a multiemployer plan or multiple employer 
plan, both the plan administrator and any contributing or adopting 
employer would be permitted to use the amended VFC Program and the 
SCC.\25\ The Department explained that the plan administrator of such a 
plan could apply on behalf of the entire plan and any participating 
employer may apply on its own behalf. Although no comments were 
received on that aspect of the 2022 proposal, to provide additional 
clarity, the Department made a change in this 2025 VFC Program to 
permit an employer in a multiemployer plan or multiple employer plan 
who wishes to correct on its own behalf to sign the application or SCC 
penalty of perjury statement and, regardless of the employer's status 
as a plan fiduciary, the penalty of perjury statement need not be 
signed by another plan fiduciary. See sections 6.1 and 6.2.
---------------------------------------------------------------------------

    \25\ See 87 FR 71165 (citing the preamble to the 2006 VFC 
Program, 71 FR 20262, 20264 (April 19, 2006)). An employer would be 
considered a Plan Official for purposes of the Program.
---------------------------------------------------------------------------

(g) Miscellaneous Modifications--Sections 5 and 7
    The 2025 VFC Program includes assorted other clarifying changes 
that were in the November 2022 notice designed to update the Program, 
assist Program users, and maintain consistency among provisions. For 
example, section 5(d) ``Distributions'' is revised to reflect the 
cessation of both the IRS and Social Security Administration letter 
forwarding services for missing participants, and to provide a 
reference to the Missing Participants--Best Practices for Pension Plans 
guidance issued by the Department.\26\ Another example is sections 
7.3(a)(3) and (b)(3). Those sections provide that only certain 
supporting documentation must be provided with the application. The 
words ``unless otherwise requested by EBSA'' have been added to confirm 
that EBSA may, in individual cases, request copies of other supporting 
documentation. Similarly, references to self-corrector, self-
correction, and the SCC notice have been added to various provisions 
where appropriate. Additionally, in sections 7.4(d) and (e) dealing 
with transactions at greater and less than fair market value 
respectively, the documentation requirement for the qualified, 
independent appraiser's report has been revised to correctly specify 
value rather than fair market value at the time of the transaction. In 
section 7.5 (``Benefits'') concerning the distribution of overvalued 
plan assets in a defined contribution plan, the correction specifically 
requires the restoration to the plan of the amount that exceeded the 
paid distribution amount to which all affected participants were 
entitled under the terms of the plan, plus Lost Earnings as described 
in section 5(b) on the overpaid distributions.\27\
---------------------------------------------------------------------------

    \26\ Available at www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/retirement/missing-participants-guidance.
    \27\ The preamble to the 2022 VFC Program proposed updates noted 
that, although a copy of the fidelity bond was originally required 
to be included with an application, the 2002 Program was modified to 
instead permit applicants to include information concerning the 
plan's ERISA fidelity bond, and this informational requirement was 
eliminated in the 2006 Program. Although the informational 
requirement was not proposed to be added back to the Program, the 
preamble to the 2022 proposed revisions emphasized that the prior 
modifications focused merely on streamlining the application process 
and should not be misconstrued as eliminating or modifying the ERISA 
section 412 bonding requirements that protect plans against loss by 
reason of acts of fraud or dishonesty. For information on the ERISA 
section 412 bonding requirements, see FAB 2008-04, (Nov. 25, 2008); 
29 CFR 2550.412-1 (1975) and Part 2580 (1985).
---------------------------------------------------------------------------

4. Decisions on Requests for Comment on Further Expansion of VFC 
Program
    The preamble to the 2022 VFC Program proposed updates included a 
solicitation of public comments on potential further expansion or 
revision of the Program in four specific areas: (i) missing and 
nonresponsive participants and beneficiaries, (ii) integration of the 
VFC Program with corrections under the IRS's EPCRS, (iii) adoption of a 
pre-audit compliance program, and (iv) electronic VFC Program 
submissions. Commenters were generally supportive of further changes to 
the VFC Program in these areas.
    With respect to revising the program to either permit or require 
that VFC Program applications be submitted electronically, the 
Department intends to continue to evaluate alternative approaches to e-
submission, e.g., email versus an internet or web-based portal, but has 
decided to continue the current process under which the EBSA Regional 
Offices that administer the VFC Program application process can make 
available email boxes that can be used for e-submission of VFC Program 
applications and supporting documents. Text was added to the VFC 
Program to encourage applicants to contact the relevant Regional Office 
about email submission options and format requirements, e.g., penalty 
of perjury statements.

[[Page 4203]]

    However, with respect to missing and nonresponsive participants and 
beneficiaries and the other two areas identified for potential 
expansion, the Department believes they all involve important fiduciary 
compliance issues and central aspects of the Program that require 
careful development of issues and options. For example, with respect to 
revising the Program to extend to Breaches in connection with missing 
and nonresponsive participants and beneficiaries, the Department may 
consider ways to incorporate, as corrective action, the provision of 
information to the Department for its Retirement Savings Lost and Found 
searchable database described in ERISA section 523. While the 
Department has not included these areas of expansion in the 2025 VFC 
Program, it will consider these issues further and may propose 
expansion of the Program in these areas in a separate project.

C. Regulatory Impact Analysis

    The following is a discussion of the examination of the effects of 
this regulatory action as required by Executive Order 12866,\28\ 
Executive Order 13563,\29\ the Paperwork Reduction Act of 1995,\30\ the 
Regulatory Flexibility Act,\31\ section 202 of the Unfunded Mandates 
Reform Act of 1995,\32\ Executive Order 13132,\33\ and the 
Congressional Review Act.\34\
---------------------------------------------------------------------------

    \28\ Regulatory Planning and Review, 58 FR 51735 (Oct. 4, 1993).
    \29\ Improving Regulation and Regulatory Review, 76 FR 3821 
(Jan. 18, 2011).
    \30\ 44 U.S.C. 3506(c)(2)(A) (1995).
    \31\ 5 U.S.C. 601 et seq. (1980).
    \32\ 2 U.S.C. 1501 et seq. (1995).
    \33\ Federalism, 64 FR 153 (Aug. 4, 1999).
    \34\ 5 U.S.C. 804(2) (1996).
---------------------------------------------------------------------------

1. Executive Orders 12866 and 13563

    Executive Orders 12866 (as amended by 14094) and 13563 direct 
agencies to assess all costs and benefits of available regulatory 
alternatives and, if regulation is necessary, to select regulatory 
approaches that maximize net benefits (including potential economic, 
environmental, public health and safety effects, distributive impacts, 
and equity). Executive Order 13563 emphasizes the importance of 
quantifying both costs and benefits, of reducing costs, of harmonizing 
and streamlining rules, and of promoting flexibility.
    Under Executive Order 12866, ``significant'' regulatory actions are 
subject to the requirements of the executive order and review by the 
Office of Management and Budget (OMB). As amended by Executive Order 
14094, section 3(f) of Executive Order 12866 defines a ``significant 
regulatory action'' as any 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 (adjusted every three years by the Administrator of the 
Office of Information and Regulatory Affairs (OIRA) for changes in 
gross domestic product); 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 impacts of entitlement 
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, as 
specifically authorized in a timely manner by the Administrator of OIRA 
in each case.
    For this purpose, a ``rule'' includes ``an agency statement of 
general applicability and future effect . . . that is designed to 
implement, interpret, or prescribe . . . policy or to describe the 
procedure or practice requirements of an agency.''
    OMB has determined that this action is significant under section 
3(f) Accordingly, OMB has reviewed this action, and the Department has 
assessed the costs and benefits of its amended enforcement policy and 
related PTE proposal.
    The VFC Program is designed to provide an efficient, cost-effective 
method for Plan Officials to correct a variety of ERISA fiduciary 
breaches and prohibited transactions and receive Departmental 
recognition of the correction. Specifically, the amendments to the 
Program add a SCC for delinquent transmittal of participant 
contributions and loan repayments to a pension plan under certain 
circumstances; clarify some existing transactions eligible for 
correction under the Program; expand the scope of other transactions 
currently eligible for correction; and simplify certain administrative 
or procedural requirements for participation in and correction of 
transactions under the VFC Program. In addition, the amendments to the 
Program add a SCC for certain participant loan failures self-corrected 
under the IRS's EPCRS.
    The Department expects that the amendments to the VFC Program will 
increase efficiency and accessibility for potential applicants and 
self-correctors. These changes, described further below, include in 
part, a new SCC for delinquent participant contributions and loan 
repayments involving Lost Earnings less than or equal to $1,000, 
acceptance of bulk applications with modified requirements, and 
increased flexibility in the procedures for a variety of other 
transactions. These changes also include elimination from the exemption 
of a three-year limitation for VFC Program applicants that take 
advantage of the relief provided by the VFC Program and the exemption 
for a similar type of transaction.
(a) Affected Entities
    All pension and welfare plans can utilize the VFC Program if they 
have a fiduciary breach for which there is an eligible transaction. 
Parties that are covered by section 4975 of the Code can rely on the 
related class exemption for excise tax relief for transactions 
identified in the exemption that are corrected under the VFC Program. 
In 2021 there were 718,736 defined contribution plans and 46,388 
defined benefit plans that would be impacted by these changes.\35\ In 
2022 there were an estimated 2,790,000 health plans \36\ and 630,000 
other welfare benefit plans that would also be impacted by these 
changes.\37\
---------------------------------------------------------------------------

    \35\ Employee Benefits Security Administration, Private Pension 
Plan Bulletin: Abstract of 2021 Form 5500 Annual Reports, (September 
2023).
    \36\ U.S. Department of Labor, EBSA calculations using the 2022 
Medical Expenditure Panel Survey, Insurance Component (MEPS-IC), and 
2020 Census County Business Patterns.
    \37\ U.S. Department of Labor, EBSA calculations using non-
health welfare plan Form 5500 filings and projecting non-filers 
using estimates based on the non-filing health universe.

---------------------------------------------------------------------------

[[Page 4204]]

    An average of 1,226 applicants per year used the VFC Program from 
2021 to 2023. The Department estimates that the 73 percent of VFC 
Program applicants will move to the SCC.\38\ The Department also 
estimates a one percent increase in the number of self-corrections, or 
909 self-corrections,\39\ resulting from the removal of the three-year 
limitation provision for self-correctors.
---------------------------------------------------------------------------

    \38\ The Department estimates that the SCC will streamline the 
process for the 73 percent of small and large VFC Program applicants 
involving Lost Earnings less than or equal to $1,000.
    \39\ 1,226 applicants x 73.4% x 1.01 = 909 self-corrections.
---------------------------------------------------------------------------

    The Department also projects that changes to the VFC Program will 
result in two new Program users filing bulk applications and 326 
Program users filing non-bulk applications.\40\ Please see Table 1 for 
the number of plans that will utilize the VFC Program and exemption.
---------------------------------------------------------------------------

    \40\ 1,226 applicants x (100% minus 74.3%) = 326 non-bulk 
applicants.

Table 1--Number of Plans That Will Utilize the VFC Program and Exemption
------------------------------------------------------------------------
                                                               Number of
                                                                 plans
------------------------------------------------------------------------
Filing Bulk Applications.....................................          2
Filing Non-Bulk Applications.................................        326
SCC..........................................................        909
                                                              ----------
    Total....................................................      1,237
------------------------------------------------------------------------

(b) Benefits and Costs
    The Department believes that the benefits of the amended VFC 
Program and related PTE justify its costs. Because participation is 
voluntary, the VFC Program imposes no costs unless Plan Officials 
choose to avail themselves of the opportunity to correct a potential 
fiduciary breach under the terms of the VFC Program. Plans are expected 
to only utilize the program if the benefits of using the program exceed 
the costs. The Department expects that the revised VFC Program will be 
easier and more useful for potential applicants. The greater efficiency 
and accessibility that will result from the availability of a SCC for 
delinquent participant contributions, and other expansions and 
clarifying modifications of the Program, are expected to make the 
Program easier to use, to lessen the cost of participation in many 
instances, and to increase efficiency for both applicants and 
reviewers.
    The VFC Program provides incentives for fiduciaries to correct a 
potential fiduciary breach. Benefits for Plan Officials who are granted 
relief under the VFC Program include elimination of risks arising from 
an otherwise uncorrected fiduciary breach, as well as savings of 
resources that otherwise might have been needed to defend against a 
civil action by the Department based on the breach. The VFC Program has 
been very successful to date in encouraging and facilitating the 
correction of violations.
    The changes to the VFC Program will allow Plan Officials to obtain 
the benefits of the program at a reduced cost. The Department hopes 
that this cost reduction may encourage other Plan Officials to correct 
previously undetected and unreported fiduciary breaches and reimburse 
plan losses, which would enhance the retirement income security of 
participants and beneficiaries; however, it has no data to reliably 
predict the extent of the increased usage. The Department will continue 
to actively monitor the use of the VFC Program and evaluate its 
benefits and costs. The Department is unable to predict with certainty 
either the reduction in application costs that will arise from the 
revisions to the Program, or the potential increase in participation 
that will be associated with these revisions. One commenter requested 
the Department collect additional data from the VFCP applications to 
assess the VFC Program and SCC. The commenter suggested collecting data 
on the characteristics of the corrections and plans utilizing the 
program, including the amount of correction, the types of transactions 
corrected, the size of retirement plans, the date of the prohibited 
transaction, and the date by which participant contributions or loan 
repayments were supposed to be remitted to the plan. The commenter also 
suggested to conduct follow-up surveys or interviews with plans that 
use the VFC program. While this data could be beneficial, the 
Department seeks to minimize administrative costs.
    An additional and significant benefit of the VFC Program accrues to 
participants and beneficiaries through the correction of fiduciary 
breaches and the restoration to the plan of amounts representing losses 
or improperly generated profits arising from impermissible 
transactions, resulting in greater security of plan assets and future 
benefits. Encouraging greater participation in the VFC Program by 
lowering the costs of using it could help reduce the need for plan 
participants to pursue legal action.
    These changes to the VFC Program will reduce associated costs by 
reducing the number of hours required to make corrections and file 
applications. Compared with the existing VFC Program, the Department 
expects the amended Program's per-user costs to be lower because the 
amendments could move 73 percent of the expected VFC Program 
applications to the SCC.\41\ Moreover, implementing the SCC will reduce 
the recordkeeping and reporting cost for Plan Officials with small 
amounts of delinquent participant contributions and loan repayments, 
because they no longer will have to submit an application to the 
Department with extensive supporting documentation, but instead will 
merely submit a self-correction notice with minimal data to the 
Department and provide corroborating documentation to the plan 
administrator.
---------------------------------------------------------------------------

    \41\ The Department estimates that the SCC will streamline the 
process for 73 percent of small and large VFC cases involving Lost 
Earnings less than or equal to $1,000.
---------------------------------------------------------------------------

    This SCC also provides additional flexibility and potentially 
increase use to Plan Officials by eliminating the three-year limitation 
in the PTE. Please see Table 2 for estimates and cost savings for VFC 
Program applicants. The estimates presented in Column A are obtained 
using similar assumptions and methods as in Column B. The estimates 
presented in Column B are based on the estimates presented in Table 7.

[[Page 4205]]



               Table 2--Cost Savings for VFC Program Applicants From Program and Exemption Changes
----------------------------------------------------------------------------------------------------------------
                                                        Cost before program   Cost after program
                                                           and exemption        and exemption      Cost savings
                                                              changes              changes
                                                                        (A)                  (B)           (A-B)
----------------------------------------------------------------------------------------------------------------
Traditional VFC Program (annual)......................             $765,570             $215,876        $549,693
SCC (annual)..........................................  ...................              355,910        -355,910
VFCP Exemption (annual)...............................              120,236              120,236               0
                                                       ---------------------------------------------------------
    Total (annual)....................................              885,806              692,023         193,784
----------------------------------------------------------------------------------------------------------------

    Plans or their service providers will need to familiarize 
themselves with the changes to the VFC Program and amendments to the 
PTE. Service providers may help multiple plans in a year or across 
years, so while it could take a service provider multiple hours to 
review the amended requirements, the actual burden impact on an 
individual plan would be less. The Department assumes that it will take 
two hours per plan to review the changes and fill out the VFCP 
application. Please see Table 3 for calculations and burden totals.

                                  Table 3--Hour Burden for Rule Familiarization
----------------------------------------------------------------------------------------------------------------
                                                                                                       Dollar
                                                    Number of    Number of    Total hour   Hourly    equivalent
                                                    entities     hours per      burden      wage       of hour
                                                                   entity                              burden
                                                           (A)          (B)      (A x B)       (C)   (A x B x C)
----------------------------------------------------------------------------------------------------------------
Compensation and benefits managers familiarize           1,237            2        2,474   $124.75      $308,632
 with the changes to the VFC Program and
 Exemption (first year).........................
                                                 ---------------------------------------------------------------
    Total.......................................         1,237  ...........        2,474  ........       308,632
----------------------------------------------------------------------------------------------------------------

    Overall, the Department estimates that the costs of the VFC Program 
and the associated class exemption, in their amended forms, would total 
approximately $690,798 ($669,600 in annual equivalent costs reflecting 
the monetized cost of the work performed by in-house personnel and 
outside service providers and $21,198 in annual cost burden reflecting 
the cost of materials and postage). Over 10 years, the costs associated 
with the VFC Program and associated class exemption would total 
approximately $7.5 million, annualized to $1 million per year (using a 
7 percent discount rate).\42\
---------------------------------------------------------------------------

    \42\ Over 10 years, the costs associated with the VFCP Program 
and associated class exemption would total approximately $8.8 
million, annualized to $1 million per year (using a 3 percent 
discount rate).
---------------------------------------------------------------------------

2. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (PRA 95) (44 
U.S.C. 350(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 a comment that specifically addressed the 
paperwork burden analysis of the information collection requirements 
contained in the 2022 VFC Program proposed revisions. The commenter 
attempted to adjust the labor wage rates; however, the Department has 
already accounted for inflation in the labor rates.
    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 by contacting the PRA addressee listed in the 
following sentence or at www.RegInfo.gov. For additional information 
contact, U.S. Department of Labor, Employee Benefits Security 
Administration, Office of Research and Analysis, Attention: PRA 
Officer, 200 Constitution Avenue NW, Room N-5718, Washington, DC 20210; 
or send to [email protected].
    The amended VFC Program, described above, includes a SCC for 
delinquent participant contributions and loan repayments to pension 
plans involving Lost Earnings less than or equal to $1,000, streamlined 
requirements for bulk applications, and it expands and modifies 
transactions that are currently eligible for the VFC Program. The SCC 
permits applicants to self-correct, and then provide EBSA with a notice 
of the self-correction through the online VFC Program web tool. Service 
providers are able to submit bulk applications to the VFC Program, 
under the existing terms and requirements of the Program, with some 
easing of the eligibility and information requirements. Under the new 
bulk applicant provisions, the bulk applicant will receive a no action 
letter providing relief only to the service provider correcting 
transactions involving each of the plans named in the application.
    An average of 1,226 applicants per year used the VFC Program from 
2021 to 2023. The Department estimates that the 73 percent of VFC 
Program applicants will move to the SCC.\43\ Please see Table 1 for the 
number of plans that will utilize the VFC Program and associated class 
exemption PTE 2002-51.
---------------------------------------------------------------------------

    \43\ The Department estimates that the Self-Correction Component 
will streamline the process for the 73 percent of small and large 
VFC Program applicants involving Lost Earnings less than or equal to 
$1,000.
---------------------------------------------------------------------------

    In addition to the VFC Program, the Department is publishing a 
final amendment to the associated class exemption PTE 2002-51, which 
applies only to qualifying applicants and self-correctors participating 
in the VFC Program. The exemption is currently unavailable to VFC 
Program applicants that have, within the previous three years, taken 
advantage of the relief

[[Page 4206]]

provided by the VFC Program and the exemption for a similar type of 
transaction. The three-year provision was initially included in the 
exemption to prevent parties from becoming lax in complying with 
fiduciary and other ERISA duties because of the availability of the 
exemption. Based on the Department's experience with the VFC Program 
and the exemption, the Department concluded that the risk of such 
behavior is low and therefore is eliminating the three-year limitation.
    The overall paperwork burden for the amended VFC Program and the 
amended PTE 2002-51 is provided below.
VFC Program
    For the VFC Program, the Department estimates that Plan Officials 
will devote 2.5 hours of clerical staff gathering paperwork, one hour 
of a compensation and benefits manager calculating Lost Earnings, and 
one hour of clerical staff engaging in recordkeeping activities for 
each non-bulk application or self-correction. The Department estimates 
that for each bulk application, Plan Officials will devote 25 hours of 
clerical staff gathering paperwork, 10 hours of a compensation and 
benefits manager calculating Lost Earnings, and 10 hours of clerical 
staff engaging in recordkeeping activities. Please see Table 4 for 
calculations and burden totals.

                                       Table 4--Hour Burden of VFC Program
----------------------------------------------------------------------------------------------------------------
                                                            Number of
                                               Number of    hours per    Total hour    Wage    Dollar equivalent
                                               entities       entity       burden      rate      of hour burden
                                                      (A)          (B)      (A x B)       (C)        (A x B x C)
----------------------------------------------------------------------------------------------------------------
                                             Traditional VFC Program
----------------------------------------------------------------------------------------------------------------
Compensation and benefits managers                    326            1          326   $140.32            $45,744
 calculate Lost Earnings (non-bulk)........
Clerical staff gather information (non-               326          2.5          815     65.99             53,782
 bulk).....................................
Clerical staff maintain recordkeeping (non-           326            1          326     65.99             21,513
 bulk).....................................
Compensation and benefits managers                      2           10           20    140.32              2,806
 calculate Lost Earnings (bulk)............
Clerical staff gather information (bulk)...             2           25           50     65.99              3,300
Clerical staff maintain recordkeeping                   2           10           20     65.99              1,320
 (bulk)....................................
----------------------------------------------------------------------------------------------------------------
                                                       SCC
----------------------------------------------------------------------------------------------------------------
Compensation and benefits managers                    909            1          909    140.32            127,551
 calculate Lost Earnings...................
Clerical staff gather information..........           909          2.5        2,273     65.99            149,962
Clerical staff maintain recordkeeping......           909            1          909     65.99             59,985
                                            --------------------------------------------------------------------
    Total..................................         1,237  ...........        5,648  ........            465,963
----------------------------------------------------------------------------------------------------------------

    The Department estimates that external service providers will spend 
about 10 minutes completing and submitting the online SCC notice, 20 
hours completing and submitting bulk applications, and two hours 
completing and submitting all other applications.\44\ The mailing cost 
per application is approximately $10.\45\ Please see Table 5 for 
calculations and burden totals.
---------------------------------------------------------------------------

    \44\ It should be noted that the required checklist for 
applications filed with the Department under the Program appears 
twice within the Appendices to the Program. While it is required to 
be submitted only once, it is included as the separate Appendix B 
for applicants who do not choose to use the model application in 
Appendix E, and separately as the final item in the model 
application for ease of use for those who do choose to use the model 
application.
    \45\ United States Postal Service, Priority Mail, (2024), 
https://www.usps.com/ship/priority-mail.htm.

                                           Table 5--Hour and Cost Burden of Service Providers for VFC Program
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                    Dollar
                                                                 Number of    Number of    Total hour    Wage     equivalent   Mailing cost
                                                                 entities     hours per      burden      rate       of hour     per entity   Cost burden
                                                                                entity                              burden
                                                                        (A)          (B)      (A x B)       (C)   (A x B x C)           (D)      (A x D)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Service providers prepare information (non-bulk).............           326            2          652   $121.53       $79,238        $10.10       $3,293
Service providers prepare information (bulk).................             2           20           40    121.53         4,861         10.10           20
Service providers maintain recordkeeping for SCC.............           909         0.17          152    121.53        18,412  ............  ...........
                                                              ------------------------------------------------------------------------------------------
    Total....................................................         1,237  ...........          844  ........       102,511  ............        3,313
--------------------------------------------------------------------------------------------------------------------------------------------------------

VFCP Class Exemption (PTE 2002-51)
    The Department estimates that all self-correctors and VFC Program 
applicants will use the amended class exemption. The Department has 
determined that service providers will prepare the documentation 
required by the exemption which will require approximately one hour for 
completion and delivery. VFC Program applicants are required to send 
notices to their participants and beneficiaries. The mailing cost per 
notice is $0.78.\46\ Please see Table 6 for calculations and burden 
totals.
---------------------------------------------------------------------------

    \46\ The mailing cost is calculated in the following manner: (1 
page x $0.73 for postage + $0.05 for material costs) = $0.78.

[[Page 4207]]



                                                     Table 6--Hour and Cost Burden of VFCP Exemption
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                    Dollar
                                                                 Number of    Number of    Total hour    Wage     equivalent   Mailing cost
                                                                 entities     hours per      burden      rate       of hour     per entity   Cost burden
                                                                                entity                              burden
                                                                        (A)          (B)      (A x B)       (C)   (A x B x C)           (D)      (A x D)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Service providers prepare information........................           389            1          389   $121.53       $47,235  ............  ...........
Participants receiving notices for exemption through mail,           24,500         0.03          817     65.99        53,892         $0.78      $19,110
 prepared by service providers...............................
                                                              ------------------------------------------------------------------------------------------
Total........................................................        24,889  ...........        1,205  ........       101,126  ............       19,110
--------------------------------------------------------------------------------------------------------------------------------------------------------

Summary
    Please see Table 7 for the total annual hour and cost burden for 
the information collection arising from the VFC Program and the 
exemption.

                                   Table 7--Total Annual Hour and Cost Burden
----------------------------------------------------------------------------------------------------------------
                                                                   Total dollar
                                                    Total hour     equivalent of    Total cost      Total cost
                                                      burden        hour burden       burden
                                                             (A)             (B)             (C)         (B + C)
----------------------------------------------------------------------------------------------------------------
VFC Program.....................................           6,491        $568,473          $3,313        $571,786
VFCP Exemption..................................           1,205         101,126          19,110         120,236
                                                 ---------------------------------------------------------------
    Total.......................................           7,696         669,600          22,423         692,023
----------------------------------------------------------------------------------------------------------------

    In summary, the categories in the table below encompass the numbers 
for both the VFC Program and the amended class exemption:
    Type of Review: Revision of currently approved collection of 
information.
    Agency: Department of Labor, Employee Benefits Security 
Administration.
    Title: Voluntary Fiduciary Correction Program.
    OMB Number: 1210-0118.
    Affected Public: Individuals or households; Business or other for-
profit; Not-for-profit institutions.
    Respondents: 1,237.
    Frequency of Response: On occasion.
    Responses: 59,991.
    Estimated Total Burden Hours: 7,696.
    Total Annual Cost (Operating and Maintenance): $22,423.

3. Regulatory Flexibility Analysis

    The Regulatory Flexibility Act (RFA) \47\ 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.\48\ Unless 
the head of an agency certifies that a final rule will not have a 
significant economic impact on a substantial number of small entities, 
section 604 \49\ of the RFA requires the agency to present a final 
regulatory flexibility analysis of these final rules.
---------------------------------------------------------------------------

    \47\ 5 U.S.C. 601 et seq. (1980).
    \48\ 5 U.S.C. 551 et seq. (1946).
    \49\ 5 U.S.C. 604 (1980).
---------------------------------------------------------------------------

    This document describes an enforcement policy of the Department 
that is not being issued as a general notice of final rulemaking. 
Therefore, the RFA does not apply. However, the Department is also 
issuing a final amendment to a class exemption (PTE 2002-51) to which 
the Regulatory Flexibility Act does apply. The Department certifies 
that the amendments to PTE 2002-51 will not have a significant economic 
impact on a substantial number of small entities. However, EBSA 
considered the potential costs and benefits of this action for small 
pension plans and the Plan Officials in developing the final amendment 
to the class exemption and believes that its greater simplicity and 
accessibility would make the Program more useful to small employers who 
wish to avail themselves of the relief offered under the exemption. 
Below is the factual basis for the certification.
    As mentioned previously, all pension and welfare plans can utilize 
the VFC Program with the related PTE if they have a fiduciary breach 
for which there is an eligible transaction. In 2021 there were 630,423 
small defined contribution plans and 39,673 small defined benefit plans 
and plan officials that would be impacted by these changes.\50\ In 2022 
there were 2,710,128 small health plans that would also be impacted by 
these changes.\51\ Currently 1,226 plan fiduciaries make use of the VFC 
Program in a given year and the Department projects a small increase to 
1,237 fiduciaries making use of the VFC Program in a given year.\52\ 
Please see Table 1 for the number of plans that will utilize the VFC 
Program and exemption.
---------------------------------------------------------------------------

    \50\ Employee Benefits Security Administration, Private Pension 
Plan Bulletin: Abstract of 2021 Form 5500 Annual Reports, (September 
2023).
    \51\ U.S. Department of Labor, EBSA calculations using the 2022 
Medical Expenditure Panel Survey, Insurance Component (MEPS-IC), and 
2020 Census County Business Patterns.
    \52\ As discussed earlier in this regulatory impact analysis, 
the Department estimates a one percent increase in the number of 
self-corrections, or 909 self-corrections, resulting from the 
removal of the three-year limitation provision for self-correctors. 
Additionally, the Department also projects that changes to the VFC 
Program will result in two new Program users filing bulk 
applications and 326 Program users filing non-bulk applications. 
Thus, the number of fiduciaries making use of the VFC Program in a 
given year is calculated in the following manner: 909 self-
corrections + 326 non-bulk applications + 2 bulk applications = 
1,237.
---------------------------------------------------------------------------

    The Department is amending the related PTE so that excise tax 
relief will be available for transactions that are corrected under the 
SCC. The Department is also amending the PTE to eliminate the three-
year limitation. Thus, all plans eligible to use the VFC Program would 
be eligible to use the PTE more than just once every three years. 
However, the Department

[[Page 4208]]

estimates that, of the total number of pension and welfare plans 
significantly less than one percent will use the PTE in a given 
year.\53\
---------------------------------------------------------------------------

    \53\ In 2021, there were 765,124 pension plans. (Source: 
Employee Benefits Security Administration, Private Pension Plan 
Bulletin: Abstract of 2021 Form 5500 Annual Reports, (September 
2023).) In 2022, there were 630,000 welfare benefit plans. (Source: 
U.S. Department of Labor, EBSA calculations using non-health welfare 
plan Form 5500 filings and projecting non-filers using estimates 
based on the non-filing health universe.) Thus, 0.08% of all pension 
and welfare plans will use the PTE in a given year. (909 plans/
(765,124 plans + 630,000 welfare benefit plans) = 0.07 percent.)
---------------------------------------------------------------------------

    The final amended PTE provides excise tax relief for self-
correctors if they pay the amount of the excise tax owed to the plan. 
The SCC can only be used in situations where the size of Lost Earnings 
is $1,000 or less. Code section 4975(a) imposes an excise tax on each 
prohibited transaction equal to 15 percent of the amount involved with 
respect to the prohibited transaction for each year (or part thereof) 
in the taxable period. Therefore, the maximum excise tax owed for each 
year would generally not exceed $150.\54\
---------------------------------------------------------------------------

    \54\ Under Reorganization Plan No. 4 of 1978, supra n. 1, the 
Secretary of the Treasury retains interpretive authority over Code 
sections 4975(a) and (b).
---------------------------------------------------------------------------

    Plans or their service providers will need to familiarize 
themselves with the amendments to the PTE. Service providers can help 
multiple plans in a year or across years, so, although it could take a 
service provider multiple hours to review the amended requirements, the 
actual burden impact on an individual plan would be less. The 
Department estimates that all self-correctors will use the new 
provisions of the amended class exemption. The per-plan cost for rule 
familiarization would be $140.\55\
---------------------------------------------------------------------------

    \55\ With an hourly rate for the in-house compensation and 
benefits manager of $140.32 per hour and one hour of burden 
allocated to a plan, the burden be plan would be $140 (rounded).
---------------------------------------------------------------------------

    For plans with the maximum Lost Earnings of $1,000 and an excise 
tax of 15 percent the maximum excise tax in each year would generally 
not exceed $150. Including the cost of rule familiarization of $140, 
the total expense could be $290 in a year. Based on the foregoing, the 
Department hereby certifies that these final amendments will not have a 
significant economic impact on a substantial number of small entities. 
Therefore, the Department has not prepared a Final Regulatory 
Flexibility Analysis.

4. Unfunded Mandates Reform Act

    For purposes of the Unfunded Mandates Reform Act of 1995 (Pub. L. 
104-4), as well as Executive Order 12875, this action does not include 
any Federal mandate that may result in expenditures by State, local, or 
Tribal governments in the aggregate of more than $100 million, adjusted 
for inflation, or increase expenditures by the private sector of more 
than $100 million, adjusted for inflation.

5. Federalism Statement

    Executive Order 13132 (August 4, 1999) outlines fundamental 
principles of federalism and requires the adherence to specific 
criteria by Federal agencies in the process of their formulation and 
implementation of policies that have ``substantial direct effects'' on 
the States, the relationship between the national government and 
States, or on the distribution of power and responsibilities among the 
various levels of government. Federal agencies promulgating regulations 
that have federalism implications must consult with State and local 
officials and describe the extent of their consultation and the nature 
of the concerns of State and local officials. This action does not have 
federalism implications because it has no substantial direct effect on 
the States, on the relationship between the national government and the 
States, or on the distribution of power and responsibilities among the 
various levels of government. Section 514 of ERISA provides, with 
certain exceptions specifically enumerated, that the provisions of 
titles I and IV of ERISA supersede any and all laws of the States as 
they relate to any employee benefit plan covered under ERISA. The 
amendments of the VFC Program in this document do not alter the 
fundamental provisions of the statute with respect to employee benefit 
plans, and as such would have no implications for the States or the 
relationship or distribution of power between the national government 
and the States.

6. Congressional Review Act

    The VFC Program is subject to the Congressional Review Act 
provisions of the Small Business Regulatory Enforcement Fairness Act of 
1996 (5 U.S.C. 801 et seq.) and will be transmitted to the Congress and 
the Comptroller General for review. OIRA has determined that The 
Program does not meet the criteria set forth in 5 U.S.C. 803(2) under 
the Act. The Program is not a ``major rule'' as that term is defined in 
5 U.S.C. 804.

    Authority: Authority: Secretary of Labor's Order 1-2011, 77 FR 
1088 (January 9, 2012). 29 U.S.C. 1132(a)(2) and (a)(5), 1136(b).

Voluntary Fiduciary Correction Program

Section 1. Purpose and Overview of the VFC Program
Section 2. Effect of the VFC Program
Section 3. Definitions
Section 4. VFC Program Eligibility
Section 5. General Rules for Acceptable Corrections
    (a) Fair Market Determinations
    (b) Correction Amount
    (c) Costs of Correction
    (d) Distributions
    (e) De Minimis Exception
Section 6. VFC Program Application and Self-Correction Component 
Procedures
    6.1 VFC Program Application Procedures
    6.2 VFC Program Self-Correction Component Procedures
Section 7. Description of Eligible Transactions and Corrections 
Under the VFC Program
    7.1 Delinquent Remittance of Participant Funds
    (a) Delinquent Participant Contributions and Loan Repayments to 
Pension Plans Under VFC Program Applications
    (b) Delinquent Participant Contributions and Loan Repayments to 
Pension Plans Under the Self-Correction Component
    (c) Delinquent Participant Contributions to Insured Welfare 
Plans
    (d) Delinquent Participant Contributions to Welfare Plan Trusts
    7.2 Loans
    (a) Loan at Fair Market Interest Rate to a Party in Interest 
With Respect to the Plan
    (b) Loan at Below-Market Interest Rate to a Party in Interest 
With Respect to the Plan
    (c) Loan at Below-Market Interest Rate to a Person Who Is Not a 
Party in Interest With Respect to the Plan
    (d) Loan at Below-Market Interest Rate Solely Due to a Delay in 
Perfecting the Plan's Security Interest
    7.3 Participant Loans
    (a) Loans Failing To Comply With Plan Provisions for Amount, 
Duration, or Level Amortization Under VFC Program Applications
    (b) Default Loans Under VFC Program Applications
    (c) Eligible Inadvertent Participant Loan Failures Under the 
Self-Correction Component
    7.4 Purchases, Sales and Exchanges
    (a) Purchase of an Asset (Including Real Property) by a Plan 
From a Party in Interest
    (b) Sale of an Asset (Including Real Property) by a Plan to a 
Party in Interest
    (c) Sale and Leaseback of Real Property to Employer
    (d) Purchase of an Asset (Including Real Property) by a Plan 
From a Person Who Is Not a Party in Interest With Respect to the 
Plan at a Price More Than Fair Market Value
    (e) Sale of an Asset (Including Real Property) by a Plan to a 
Person Who Is Not a Party in Interest With Respect to the Plan at a 
Price Less Than Fair Market Value
    (f) Holding of an Illiquid Asset Previously Purchased by a Plan

[[Page 4209]]

    7.5 Benefits
    (a) Payment of Benefits Without Properly Valuing Plan Assets on 
Which Payment Is Based
    7.6 Plan Expenses
    (a) Duplicative, Excessive, or Unnecessary Compensation Paid by 
a Plan
    (b) Expenses Improperly Paid by a Plan
    (c) Payment of Dual Compensation to a Plan Fiduciary
Appendix A. Sample VFC Program No Action Letter
Appendix B. VFC Program Application Checklist (Required)
Appendix C. List of EBSA Regional Offices
Appendix D. Lost Earnings Example
Appendix E. Model Application Form (Optional)
Appendix F. SCC Retention Record Checklist (Required)

Section 1. Purpose and Overview of the VFC Program

    The purpose of the Voluntary Fiduciary Correction Program (VFC 
Program or Program), including its Self-Correction Component (SCC), is 
to protect the financial security of workers by encouraging 
identification and correction of transactions that violate or may 
violate Part 4 of Title I of the Employee Retirement Income Security 
Act of 1974, as amended (ERISA). Part 4 of Title I of ERISA sets out 
the responsibilities of employee benefit plan fiduciaries. Section 409 
of ERISA provides that a fiduciary who breaches any of these 
responsibilities shall be personally liable to make good to the plan 
any losses to the plan resulting from each breach and to restore to the 
plan any profits the fiduciary made through the use of the plan's 
assets. Section 405 of ERISA provides that a fiduciary may be liable, 
under certain circumstances, for a breach of fiduciary responsibility 
by a co-fiduciary. In addition, under certain circumstances, there may 
be liability for knowing participation in a fiduciary breach. In order 
to assist all affected persons in understanding the requirements of 
ERISA and meeting their legal responsibilities, the Employee Benefits 
Security Administration (EBSA) is providing guidance on what 
constitutes adequate correction under Title I of ERISA for the Breaches 
described in this Program.

Section 2. Effect of the VFC Program

    (a)(1) Effect of a no action letter. EBSA generally will issue to 
the applicant a no action letter \56\ with respect to a Breach 
identified in the Program application if the eligibility requirements 
of section 4 are satisfied and a Plan Official corrects a Breach, as 
defined in section 3, in accordance with the requirements of sections 
5, 6 and 7. Pursuant to the no action letter it issues, EBSA will not 
initiate a civil investigation under Title I of ERISA regarding the 
applicant's responsibility for any transaction described in the no 
action letter, or assess civil penalties under either section 502(l) or 
502(i) of ERISA on the correction amount paid to the plan or its 
participants.
---------------------------------------------------------------------------

    \56\ See appendix A.
---------------------------------------------------------------------------

    (2) Effect of correction under the Self-Correction Component. EBSA 
will not issue a no action letter to a self-corrector under the 
Program's SCC. A self-corrector will receive an acknowledgment and 
summary of the SCC notice submission by email. If the self-corrector 
satisfies the eligibility requirements of section 4 and corrects a 
Breach, as defined in section 3, in accordance with the requirements of 
sections 5, 6 and 7, EBSA will not initiate a civil investigation under 
Title I of ERISA regarding the self-corrector's responsibility for the 
Breach identified in the SCC notice or assess civil penalties under 
section 502(l) or 502(i) of ERISA on the correction amount paid to the 
plan or its participants.
    (b) Verification. EBSA reserves the right to conduct an 
investigation at any time to determine (1) the truthfulness and 
completeness of the factual statements set forth in the Program 
application or the SCC notice and (2) that the corrective action was, 
in fact, taken.
    (c) Limits on the effect of a no action letter under the VFC 
Program. (1) In general. Any no action letter issued under the VFC 
Program is limited to the Breach and applicants identified therein. 
Moreover, the method of calculating the correction amount described in 
this Program is only intended to correct the specific Breach described 
in the application. Methods of calculating losses other than, or in 
addition to, those set forth in the Program may be more appropriate, 
depending on the facts and circumstances, if the transaction violates 
provisions of ERISA other than those that can be corrected under the 
Program. If a transaction gave rise to Breaches not specifically 
described in the Program, the relief afforded by the Program would not 
extend to such additional Breaches.
    (2) No implied approval of other matters. A no action letter does 
not imply Departmental approval of matters not included therein, 
including steps that the fiduciaries take to prevent recurrence of the 
Breach described in the application and to ensure the plan's future 
compliance with Title I of ERISA.
    (3) Material misrepresentation. Any no action letter issued under 
the VFC Program is conditioned on the truthfulness, completeness, and 
accuracy of the statements made in the application and of any 
subsequent oral and written statements or submissions. Any material 
misrepresentations or omissions will void the no action letter, 
retroactive to the date that the letter was issued by EBSA, with 
respect to the transaction that was materially misrepresented.
    (4) Applicant fails to satisfy terms of the VFC Program. If an 
application fails to satisfy the terms of the VFC Program, as 
determined by EBSA, EBSA reserves the right to investigate and take any 
other action with respect to the transaction and/or plan that is the 
subject of the application, including issuing a rejection letter.
    (5) Criminal investigations not precluded. Participation in the VFC 
Program will not preclude:
    (i) EBSA or any other governmental agency from conducting a 
criminal investigation of the transaction identified in the 
application;
    (ii) EBSA's assistance to such other agency; or
    (iii) EBSA from making the appropriate referrals of criminal 
violations as required by section 506(b) of ERISA.\57\
---------------------------------------------------------------------------

    \57\ Section 506(b) provides that the Secretary of Labor shall 
have the responsibility and authority to detect and investigate and 
refer, where appropriate, civil and criminal violations related to 
the provisions of Title I of ERISA and other related Federal laws, 
including the detection, investigation, and appropriate referrals of 
related violations of Title 18 of the United States Code.
---------------------------------------------------------------------------

    (6) Other actions not precluded. Compliance with the terms of the 
VFC Program will not preclude EBSA from taking any of the following 
actions:
    (i) Seeking removal from positions of responsibility with respect 
to a plan or other non-monetary injunctive relief against any person 
responsible for the transaction at issue;
    (ii) Referring information regarding the transaction to the 
Internal Revenue Service as required by section 3003(c) of ERISA; \58\ 
or
---------------------------------------------------------------------------

    \58\ Section 3003(c) provides that, whenever the Secretary of 
Labor obtains information indicating that a party in interest or 
disqualified person is violating section 406 of ERISA, the Secretary 
of Labor shall transmit such information to the Secretary of the 
Treasury.
---------------------------------------------------------------------------

    (iii) Imposing civil penalties under section 502(c)(2) of ERISA 
based on the failure or refusal to file a timely, complete and accurate 
Annual Report Form 5500.\59\ Applicants should be aware that amended 
annual report filings may be required if possible Breaches of ERISA 
have been identified, or if action is taken to correct possible

[[Page 4210]]

Breaches in accordance with the VFC Program.
---------------------------------------------------------------------------

    \59\ References herein to the Form 5500 include the Form 5500-SF 
as applicable.
---------------------------------------------------------------------------

    (7) Not binding on others. The issuance of a no action letter does 
not affect the ability of any other government agency, or any other 
person, to enforce any rights or carry out any authority they may have, 
with respect to matters described in the no action letter.
    (8) Example. A plan fiduciary causes the plan to purchase real 
estate from the plan sponsor under circumstances to which no prohibited 
transaction exemption applies. In connection with this transaction, the 
purchase causes the plan assets to be no longer diversified, in 
violation of ERISA section 404(a)(1)(C). If the application reflects 
full compliance with the requirements of the Program, the Department's 
no action letter would apply to the violation of ERISA section 
406(a)(1)(A) but would not apply to the violation of section 
404(a)(1)(C).
    (d) Limits on the effect of self-correction under the Self-
Correction Component. (1) In general. Any relief afforded by a self-
correction under the SCC is limited to the Breaches described in 
sections 7.1(b) and 7.3(c) of the Program and to the Plan Officials who 
complete the Penalty of Perjury Statement in accordance with section 
6.2(e) and (f) respectively. If a transaction gives rise to Breaches 
not specifically described in sections 7.1(b) and 7.3(c) of the 
Program, the relief afforded by the SCC will not extend to such 
additional Breaches.
    (2) Self-corrector fails to satisfy the terms of the Self-
Correction Component. If a self-corrector fails to satisfy the terms of 
the SCC, as determined by EBSA, EBSA reserves the right to investigate 
and take any other action with respect to the transaction and/or plan 
that is the subject of the self-correction.
    (3) Criminal investigations not precluded. Participation in the SCC 
will not preclude:
    (i) EBSA or any other governmental agency from conducting a 
criminal investigation of the transactions identified in sections 
7.1(b) and 7.3(c) of the Program;
    (ii) EBSA's assistance to such other agency; or
    (iii) EBSA from making the appropriate referrals of criminal 
violations as required by section 506(b) of ERISA.\60\
---------------------------------------------------------------------------

    \60\ See supra note 54.
---------------------------------------------------------------------------

    (4) Other actions not precluded. Compliance with the terms of the 
SCC will not preclude EBSA from taking any of the following actions:
    (i) Seeking removal from positions of responsibility with respect 
to a plan or other non-monetary injunctive relief against any person 
responsible for the transaction at issue; or
    (ii) Imposing civil penalties under section 502(c)(2) of ERISA 
based on the failure or refusal to file a timely, complete and accurate 
Annual Report Form 5500. Self-correctors should be aware that amended 
annual report filings may be required if action is taken to correct a 
Breach in accordance with submitting an SCC notice.
    (5) Not binding on others. Compliance with the SCC does not affect 
the ability of any other government agency, or any other person, to 
enforce any rights or carry out any authority they may have regarding 
the Breach corrected under the SCC.
    Example. The plan sponsor withheld monies from employees' 
paychecks, which were to be contributed, in part, to both a 401(k) plan 
and an insured health benefit plan. The plan sponsor did not remit the 
funds to either plan until four months after the Date of Withholding or 
Receipt. The plan sponsor corrects both Breaches and pays the 
appropriate Lost Earnings amount to each of the plans. The plan sponsor 
properly completes and submits an SCC notice to EBSA identifying the 
transaction involving the 401(k) plan. Assuming all conditions of the 
SCC have been met, relief under the Program is provided to the plan 
sponsor as the self-corrector for the delinquent participant 
contributions to the 401(k) plan, but not for the delinquent 
participant contributions to the insured health benefit plan. However, 
the plan sponsor may submit an application to correct the Breach 
involving the insured health benefit plan contributions under section 
7.1(c) of the Program.
    (e) Correction. The correction criteria listed in the VFC Program 
represent EBSA enforcement policy with respect to both applications 
under the Program and use of the SCC, and are provided for 
informational purposes to the public, but are not intended to confer 
enforceable rights on any person who purports to correct a Breach. 
Applicants and self-correctors are advised that the term ``correction'' 
as used in the VFC Program is not necessarily the same as 
``correction'' pursuant to section 4975 of the Internal Revenue Code 
(Code).\61\ Correction may not be achieved under the Program by 
engaging in a prohibited transaction that is not subject to a 
prohibited transaction administrative exemption.
---------------------------------------------------------------------------

    \61\ See section 4975(f)(5) of the Code; section 141.4975-13 of 
the temporary Treasury Regulations and section 53.4941(e)-1(c) of 
the Treasury Regulations. The Federal tax treatment of a violation 
and correction under the VFC Program (including the Federal income 
and employment tax consequences to participants, beneficiaries, and 
plan sponsors) are determined under the Code. The IRS has indicated 
that, unless and until the Department of the Treasury and the IRS 
issue further guidance, except in those instances where the 
fiduciary breach or its correction involve a tax abuse, correction 
under the VFC Program for a breach that constitutes a prohibited 
transaction under section 4975 of the Code generally will be treated 
as correction for purposes of section 4975. Also, correction under 
the VFC Program for a breach for which there is a similar failure 
under the IRS's EPCRS would generally be taken into account as 
correction under EPCRS.
---------------------------------------------------------------------------

    (f) EBSA's authority to investigate. EBSA reserves the right to 
conduct an investigation and take any other enforcement action relating 
to the transaction identified in a VFC Program application or SCC 
notice in certain circumstances, such as prejudice to the Department 
that may be caused by the expiration of the statute of limitations 
period, material misrepresentations or omissions, other abuses of the 
VFC Program, or significant harm to the plan or its participants that 
is not cured by the correction provided under the VFC Program. EBSA may 
also conduct a civil investigation and take any other enforcement 
action relating to matters not covered by the VFC Program application 
or SCC notice, or relating to other plans sponsored by the same plan 
sponsor, while a VFC Program application involving the plan or the plan 
sponsor is pending.
    (g) Confidentiality. EBSA will maintain the confidentiality of any 
documents submitted under the VFC Program, to the extent permitted by 
law. However, as noted in paragraphs (c)(5) and (6) and (d)(3) and (4) 
of this section, EBSA has an obligation to make referrals to the 
Internal Revenue Service (IRS) and to refer to other agencies evidence 
of criminality and other information for law enforcement purposes.

Section 3. Definitions

    (a) The terms used in this document have the same meaning as 
provided in section 3 of ERISA, 29 U.S.C. 1002, unless separately 
defined herein.
    (b) The following definitions apply for purposes of the VFC 
Program:
    (1) Breach. The term ``Breach'' means any transaction that is or 
may be a violation of the fiduciary responsibility provisions contained 
in Part 4 of Title I of ERISA.
    (2) Plan Official. The term ``Plan Official'' means a plan 
fiduciary, plan sponsor, party in interest with respect to a plan, or 
other person who is in a position to correct a Breach by filing an

[[Page 4211]]

application or submitting a SCC notice in accordance with the VFC 
Program's requirements.
    (3) Under Investigation. For purposes of section 4(a), a plan, 
potential applicant, or self-corrector shall be considered to be 
``Under Investigation'' if any investigation, review or examination 
described in (i), (ii), (iii), (iv), or (v) of this section 3 exists, 
and the plan, a Plan Official, or any authorized plan representative 
has received a written or oral notice of the investigation, review or 
examination.
    (i) EBSA is conducting an investigation or review of the plan;
    (ii) EBSA is conducting an investigation of the potential 
applicant, self-corrector, or plan sponsor in connection with an act or 
transaction directly related to the plan;
    (iii) any governmental agency is conducting a criminal 
investigation of the plan, or of the potential applicant, self-
corrector, or plan sponsor in connection with an act or transaction 
directly related to the plan;
    (iv) the IRS is conducting an Employee Plans examination of the 
plan; or
    (v) Other than investigations identified in sections 3(b)(3)(i), 
(ii), (iii), or (iv), the Pension Benefit Guaranty Corporation (PBGC), 
any state attorney general, any federal governmental agency, or any 
state insurance commissioner is conducting an investigation or 
examination of the plan, or of the applicant, self-corrector, or plan 
sponsor in connection with an act or transaction directly related to 
the plan, unless in the case of a VFC Program application, the 
applicant notifies EBSA, in writing, of such an investigation or 
examination at the time of the application.
    An applicant notifying EBSA of an investigation or examination 
under section 3(b)(3)(v) must submit the name of the examining agency 
and a contact person at such agency. Upon receipt of an application 
including such information, EBSA will promptly notify the investigating 
agency in writing of the VFC Program application. EBSA's notice will 
afford the examining agency an opportunity to provide EBSA with 
information relevant to the investigation or examination. In response 
to the information received from the investigating agency, EBSA, in its 
sole discretion, may decline to issue a no action letter to the 
applicant.
    For purposes of section 4(a), a plan shall not be considered to be 
``Under Investigation'' merely because EBSA staff has contacted the 
plan, the applicant, the self-corrector, or the plan sponsor in 
connection with a participant complaint, unless the participant 
complaint concerns the transaction described in the application or 
identified in the SCC notice and the plan has not received the 
correction amount due under the Program as of the date EBSA staff 
contacted the plan, the applicant, the self-corrector, or the plan 
sponsor. A plan also is not considered to be ``Under Investigation'' if 
the accountant of the plan is undergoing a work paper review based on 
such accountant's audit of the plan by EBSA's Office of the Chief 
Accountant under the authority of ERISA section 504(a).
    Example 1. On March 1, the plan sponsor of a multiple employer 
welfare arrangement (MEWA) received written notification from an agent 
of the state insurance commissioner's office that the MEWA has been 
scheduled for examination. The applicant does not notify EBSA of the 
examination. As of March 1, the plan is ineligible for participation in 
the VFC Program because the plan sponsor has received a notice from the 
state insurance commissioner's office concerning its intent to examine 
the plan, and the applicant did not provide EBSA written notice of the 
examination with the application.
    Example 2. Assume the same facts as in Example 1, except that the 
applicant chooses to notify EBSA in writing of the examination. The 
plan's eligibility to apply under the VFC Program would not be affected 
because the applicant provides written notice of the examination to 
EBSA with the application. EBSA will promptly notify the state 
insurance commissioner of the pending VFC Program application so that 
the state insurance commissioner's office has an opportunity to provide 
information about its examination to EBSA. EBSA will include the 
information received from the state insurance commissioner's office in 
its review of the VFC Program application.

Section 4. VFC Program Eligibility

    Eligibility for the VFC Program is conditioned on the following:
    (a) Except as provided in paragraphs (d) or (e) of this section 4, 
the plan, the applicant, or the self-corrector is not Under 
Investigation.
    (b)(1) In general. The Program application contains no evidence of 
potential criminal violations as determined by EBSA.
    (2) Exception for VFC Program applications correcting transactions 
described in Section 7.1(a). Participation in the VFC Program to 
correct delinquent participant contributions and loan repayments is 
permitted in cases where there is evidence of potential criminal 
violation by parties other than the plan administrator, the plan 
sponsor or the applicant provided:
    (i) All funds have been repaid to the plan;
    (ii) The appropriate law enforcement agency has been notified of 
the potential criminal violation; and
    (iii) The applicant submits to the appropriate EBSA office a 
statement (A) providing contact information for the law enforcement 
agency that has been notified of the alleged criminal activity; (B) 
asserting that the applicant was not involved in the potential criminal 
violation; and (C) stating whether a claim relating to the criminal 
activity has been made under an ERISA section 412 fidelity bond.
    Example. The bookkeeper of the plan sponsor of a 401(k) plan 
allegedly embezzled funds from the plan sponsor, including amounts 
which had been withheld from employees' paychecks but not yet forwarded 
to the plan. As a result of the embezzlement, participant contributions 
were remitted to the plan two months later than the plan sponsor's 
usual practice. The owner of the company sponsoring the plan was not 
involved in the embezzlement and notified local law enforcement of the 
embezzlement. This owner is eligible to submit an application for 
relief under the VFC Program despite the potential criminal violation 
if the requirements under section 4(b)(2) are met. Note that the owner 
is not eligible for relief under the SCC because the exception under 
section 4(b)(2) is only available under the VFC Program application 
process and not the SCC.
    (c) EBSA has not conducted an investigation which resulted in 
written notice to a plan fiduciary that the transaction, for which the 
potential applicant or self-corrector could otherwise have sought 
relief under the Program, has been referred to the IRS. This condition 
applies only to those transactions specifically identified in EBSA's 
written notice of referral to the IRS.
    (d) Exception for Bulk VFC Program Applicants. An applicant is 
eligible to submit a bulk application under the VFC Program, even if 
one or more of the plans named in the application (``named plans'') is 
Under Investigation, and to receive a no action letter covering each of 
the named plans provided: (1) the applicant is a service provider that 
is seeking the relief afforded by the Program only on its own behalf; 
(2) the applicant was providing services to each of the named plans at 
the time of the transaction being corrected; (3) the

[[Page 4212]]

application includes at least ten named plans; (4) all named plans 
participated in the transaction being corrected; and (5) the corrective 
action was not taken as a result of an investigation of any named plan. 
A determination by EBSA that the corrective action was taken as a 
result of an investigation of any named plan results in the no action 
letter specifically excluding such plan.
    Example. A bank provides investment management services to pension 
plans. As part of these services, it bought bonds on behalf of its plan 
clients directly from a broker dealer's inventory. The bank 
independently discovered that the broker dealer is an affiliate of the 
bank and consequently, a party in interest to the plans (PII). No 
available class exemption permitted these purchases. The bank's review 
showed it had bought bonds for thirty-three (33) of its plan clients 
from the PII broker dealer. The bank, as a service provider to the 
plans, may submit a bulk application correcting the transaction in 
compliance with section 7.4(a) of the Program provided the application 
names all 33 plans that participated in the transaction and the bank is 
seeking relief only on its own behalf under the Program. Assuming the 
applicant has complied with the terms of the VFC Program, EBSA will 
issue a no action letter to the service provider, which includes the 
name of each of the participating plans.
    (e) Exception for Eligible Inadvertent Participant Loan Failures. A 
self-corrector is eligible to correct an Eligible Inadvertent 
Participant Loan Failure under the VFC Program section 7.3(c) even if 
the plan or the self-corrector is Under Investigation provided the 
failure is eligible for self-correction under the IRS's EPCRS.

Section 5. General Rules for Acceptable Corrections

    (a) Fair Market Determinations. Many corrections require that the 
current or fair market value (FMV) of an asset be determined as of a 
particular date, usually either the date the plan originally acquired 
the asset or the date of the correction, or both. In order to be 
acceptable as part of a VFC Program correction, the valuation must meet 
the conditions in (1) through (4) below. Other corrections require that 
a fair market interest rate be determined as of a particular date, 
usually the date the loan was made. In order to be acceptable as part 
of a VFC Program correction, this determination must be made by an 
independent commercial lender, which meets the conditions in (5) below:
    (1) If there is a generally recognized market for the property 
(e.g., the New York Stock Exchange), the FMV of the asset is the 
average value of the asset on such market on the applicable date, 
unless the plan document specifies another objectively determined value 
(e.g., the closing price).
    (2) If there is no generally recognized market for the asset, the 
FMV of that asset must be determined in accordance with generally 
accepted appraisal standards by a qualified, independent appraiser and 
reflected in a written appraisal report signed by the appraiser.
    (3) An appraiser is ``qualified'' if the appraiser has met the 
education, experience, and licensing requirements that are generally 
recognized for appraisal of the type of asset being appraised.
    (4) An appraiser is ``independent'' if the appraiser is not one of 
the following, does not own or control any of the following, and is not 
owned or controlled by, or affiliated with, any of the following:
    (i) The prior owner of the asset, if the asset was purchased by the 
plan;
    (ii) The purchaser of the asset, if the asset was, or is now being, 
sold by the plan;
    (iii) Any other owner of the asset, if the plan is not the sole 
owner;
    (iv) A fiduciary of the plan (except to the extent the appraiser 
becomes a fiduciary when retained to perform this appraisal for the 
plan);
    (v) A party in interest with respect to the plan (except to the 
extent the appraiser becomes a party in interest when retained to 
perform this appraisal for the plan); or
    (vi) The VFC Program applicant.
    (5) A commercial lender is ``independent'' if it is not one of the 
following, does not own or control any of the following, and is not 
owned or controlled by, or affiliated with any of the following:
    (i) A person or entity who was involved in securing or maintaining 
the loan, or in determining or modifying the terms of the loan at any 
time during the life of the loan;
    (ii) A fiduciary of the plan (except to the extent the commercial 
lender becomes a fiduciary when retained to provide this service for 
the plan);
    (iii) A party in interest with respect to the plan (except to the 
extent the commercial lender becomes a party in interest when retained 
to provide this service for the plan); or
    (iv) The VFC Program applicant.
    (b) Correction Amount. (1) In general. For purposes of the VFC 
Program, the correction amount is the amount that must be paid to the 
plan as a result of the Breach in order to make the plan whole. In most 
instances, the correction amount will be a combination of the Principal 
Amount involved in the transaction (see paragraph (b)(2) of this 
section), the Lost Earnings amount, which is earnings that would have 
been earned on the Principal Amount for the period of the transaction 
(see paragraph (b)(6) of this section, and also see paragraph (b)(3) of 
this section for a special rule for Loss Date under the SCC), and any 
interest on Lost Earnings. However, in circumstances when the 
Restoration of Profits amount (see paragraph (b)(7) of this section) 
exceeds the Lost Earnings amount and any interest on Lost Earnings, the 
correction amount will be a combination of the Principal Amount and the 
Restoration of Profits amount. The responsible fiduciary, plan sponsor 
or other Plan Official, must pay the correction amount and any costs of 
correction. No part of the correction amount or costs of correction can 
be paid from plan assets, including charges against participant 
accounts or plan forfeiture accounts.
    (2) Principal Amount. ``Principal Amount'' is the amount that would 
have been available to the plan for investment or distribution on the 
date of the Breach, had the Breach not occurred. The Principal Amount, 
when applicable, must be determined for each transaction by reference 
to section 7 of the VFC Program. Generally, the Principal Amount is the 
base amount on which Lost Earnings and, if applicable, Restoration of 
Profits is calculated. The Principal Amount shall include any 
transaction costs associated with entering into the transaction that 
constitutes the Breach, which were paid by the plan.
    (3) Loss Date. (i) In general ``Loss Date'' is the date that the 
plan lost the use of the Principal Amount.
    (ii) Special rule for delinquent participant contributions and loan 
repayments under the SCC section 7.1(b). ``Loss Date'' is the Date of 
Withholding or Receipt.
    (4) Date of Withholding or Receipt. ``Date of Withholding or 
Receipt'' is the date the amount would otherwise have been payable to 
the participant in cash in the case of amounts withheld by an employer 
from a participant's wages, or the day on which the participant 
contribution or loan payment is received by the employer in the case of 
amounts that a participant or beneficiary pays to an employer. Date of 
Withholding or Receipt is not the same date as the date on which 
contributions or loan repayments could reasonably have been segregated 
from the employer general assets.
    Example 1. An employer pays its employees' wages on the 1st and the

[[Page 4213]]

15th of each month. Participant contributions to a pension plan are 
withheld from employees' wages on these dates. The employer determined 
that it could reasonably take two business days to segregate these 
withholdings from its general assets for transmittal to the plan. The 
``Date of Withholding or Receipt'' is the 1st and 15th of each month. 
For purposes of a Program application to correct delinquent participant 
contributions, without taking into account any non-business days, the 
``Loss Date'' would be the 3rd and 17th of each month.
    Example 2. Assuming the same facts as Example 1, except the 
delinquent participant contributions are being corrected using the SCC. 
The ``Date of Withholding or Receipt'' is the 1st and 15th of each 
month. For purposes of using the SCC to correct delinquent participant 
contributions, the ``Loss Date'' would be the 1st and 15th of each 
month.
    (5) Recovery Date. ``Recovery Date'' is the date that the Principal 
Amount is restored to the plan.
    (6) Lost Earnings. (i) General. ``Lost Earnings'' is intended to 
approximate the amount that would have been earned by the plan on the 
Principal Amount, but for the Breach. For purposes of this Program, 
Lost Earnings shall be calculated in accordance with this paragraph.
    (ii) Initial Calculation. Lost Earnings shall be calculated by: (A) 
determining the applicable corporate underpayment rate(s) established 
under section 6621(a)(2) of the Code \62\ for each quarter (or portion 
thereof) for the period beginning with the Loss Date and ending with 
the Recovery Date; (B) determining, by reference to IRS Revenue 
Procedure 95-17,\63\ the applicable factor(s) for such quarterly 
underpayment rate(s) for each quarter (or portion thereof) of the 
period beginning with the Loss Date and ending with the Recovery Date; 
and (C) multiplying the Principal Amount by the first applicable factor 
to determine the amount of earnings for the first quarter (or portion 
thereof). If the Loss Date and Recovery Date are within the same 
quarter, the initial calculation is complete. If the Recovery Date is 
not in the same quarter as the Loss Date, the applicable factor for 
each subsequent quarter (or portion thereof) must be applied to the sum 
of the Principal Amount and all earnings as of the end of the 
immediately preceding quarter (or portion thereof), until Lost Earnings 
have been calculated for the entire period, ending with the Recovery 
Date.
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    \62\ These underpayment rates are displayed on EBSA's website 
and will be updated when necessary.
    \63\ Rev. Proc. 95-17, 1995-1 C.B. 556 (Feb. 8, 1995). These 
factors, which are displayed on EBSA's website in a tabular format, 
incorporate daily compounding of an interest rate over a set period 
of time.
---------------------------------------------------------------------------

    (iii) Payment of Lost Earnings after Recovery Date. If Lost 
Earnings are not paid to the plan on the Recovery Date along with the 
Principal Amount, payment of Lost Earnings shall include interest on 
the amount of Lost Earnings. Such interest shall be calculated in the 
same manner as Lost Earnings described in paragraph (b)(6)(ii) above, 
for the period beginning on the Recovery Date and ending on the date 
the Lost Earnings are paid to the plan.
    (iv) Special Rule for Transactions Causing Large Losses. If the 
amount of Lost Earnings (determined in accordance with paragraph 
(b)(6)(ii) above) and any interest added to such Lost Earnings 
(determined in accordance with paragraph (b)(6)(iii) above), exceed 
$100,000, the amount of Lost Earnings and interest, if any, to be paid 
to the plan shall be determined in accordance with paragraphs 
(b)(6)(ii) and (iii) above, substituting the applicable underpayment 
rates under section 6621(c)(1) of the Code \64\ in lieu of the rates 
under section 6621(a)(2).
---------------------------------------------------------------------------

    \64\ These underpayment rates are displayed on EBSA's website 
and will be updated when necessary.
---------------------------------------------------------------------------

    (v) Method of Calculation for VFC Program Applications. For 
purposes of calculating Lost Earnings and interest, if any, a Plan 
Official may either (A) use the Online Calculator described in 
paragraph (b)(8) below, or (B) perform a manual calculation in 
accordance with subparagraphs (i) through (iv) of this paragraph 
(b)(6). A Plan Official using the Online Calculator or performing a 
manual calculation shall include as part of the VFC Program application 
sufficient information to verify the correctness of the amounts to be 
paid to the plan.
    (vi) Method of Calculation under the SCC. For purposes of 
calculating Lost Earnings and interest, if any, the self-corrector must 
use the Online Calculator described in paragraph (b)(8) below.
    (7) Restoration of Profits. (i) General. If the Principal Amount 
was used for a specific purpose such that a profit on the use of the 
Principal Amount is determinable, the Plan Official must calculate the 
Restoration of Profits amount and compare it to the Lost Earnings 
amount to determine the correction amount (see paragraph (b)(1) of this 
section). If the Restoration of Profits amount exceeds Lost Earnings 
and interest, if any, the Restoration of Profits amount must be paid to 
the plan instead of Lost Earnings. ``Restoration of Profits'' is a 
combination of two amounts: (A) the amount of profit made on the use of 
the Principal Amount by the fiduciary or party in interest who engaged 
in the Breach, or by a person who knowingly participated in the Breach, 
and (B) if the profit is returned to the plan on a date later than the 
date on which the profit was realized (i.e., received or determined), 
the amount of interest earned on such profit from the date the profit 
was realized to the date on which the profit is paid to the plan. The 
amount of such interest shall be determined in accordance with 
paragraph (b)(7)(ii) below.
    (ii) Calculation of Interest. Interest shall be calculated by: (A) 
determining the applicable corporate underpayment rate(s) established 
under section 6621(a)(2) of the Code for each quarter (or portion 
thereof) for the period beginning with the date the profit was realized 
(i.e. received or determined) and ending with the date on which the 
profit is paid to the plan; (B) determining, by reference to IRS 
Revenue Procedure 95-17, the applicable factor(s) for such quarterly 
underpayment rate(s) for each quarter (or portion thereof) of the 
period beginning with the date the profit was realized and ending with 
the date on which the profit is paid to the plan; and (C) multiplying 
the first applicable factor by the profit on the Principal Amount, 
referred to in paragraph (b)(7)(i)(A) above, to determine the amount of 
interest for the first quarter (or portion thereof). If the date the 
profit was realized and the date the profit is paid to the plan are 
within the same quarter, the initial calculation is complete. If the 
date the profit was realized is not in the same quarter as the date the 
profit was paid to the plan, the applicable factor for each subsequent 
quarter (or portion thereof) must be applied to the sum of the profit 
on the Principal Amount, referred to in paragraph (b)(7)(i)(A) above, 
and all interest as of the end of the immediately preceding quarter (or 
portion thereof), until interest has been calculated for the entire 
period, ending with the date the profit is paid to the plan.
    (iii) Special Rule for Transactions Resulting in Large 
Restorations. If the amount of Restoration of Profits (determined in 
accordance with paragraph (b)(7)(i) above) exceeds $100,000, the amount 
of any interest on the Restoration of Profits to be paid to the plan 
shall be determined in accordance with paragraph (b)(7)(ii) above, 
substituting the applicable underpayment rates under section

[[Page 4214]]

6621(c)(1) of the Code in lieu of the rates under section 6621(a)(2).
    (iv) Method of Calculation for VFC Program Applications. For 
purposes of calculating the interest amount for Restoration of Profits, 
pursuant to paragraphs (b)(7)(ii) and (iii) above, a Plan Official may 
either (A) use the Online Calculator described in paragraph (b)(8) 
below, or (B) perform a manual calculation in accordance with 
subparagraphs (ii) and (iii) of this paragraph (b)(7). A Plan Official 
using the Online Calculator or performing a manual calculation shall 
include as part of the VFC Program application sufficient information 
to verify the correctness of the amounts to be paid to the plan.
    (8) Online Calculator. ``Online Calculator'' is an internet based 
compliance assistance tool provided on EBSA's website that permits 
applicants and self-correctors to calculate the amount of Lost 
Earnings, any interest on Lost Earnings, and the interest amount for 
Restoration of Profits, if applicable, for certain transactions. The 
Online Calculator will be updated as necessary.
    (i) Lost Earnings and Interest. To calculate Lost Earnings, 
applicants or self-correctors must input the (A) Principal Amount, (B) 
Loss Date, (C) Recovery Date, and, if the final payment will occur 
after the Recovery Date, (D) the date of such final payment. The Online 
Calculator selects the applicable factors under Revenue Procedure 95-17 
after referencing the underpayment rates over the relevant time period. 
The Online Calculator then automatically applies the factors to provide 
applicants and self-correctors with the amount of Lost Earnings and 
interest, if any, that must be paid to the plan.
    (ii) Interest Amount for Restoration of Profits. To calculate the 
interest amount on the profit, applicants must input (A) the amount of 
profit, (B) the date the amount of profit was realized (i.e. received 
or determined), and (C) the date of payment of the Restoration of 
Profits amount. The Online Calculator selects the applicable factors 
under Revenue Procedure 95-17 after referencing the underpayment rates 
over the relevant time period. The Online Calculator then automatically 
applies the factors to provide applicants with the interest amount on 
the profit that must be paid to the plan.
    (9) The principles of paragraph (b) of this section are illustrated 
by example in Appendix D.
    (c) Costs of Correction. (1) The fiduciary, plan sponsor or other 
Plan Official, must pay the correction amount and costs of correction. 
The costs of correction cannot be paid from plan assets, including 
charges against participant accounts or plan forfeiture accounts.
    (2) The correction amount and the costs of correction include, 
where appropriate, the Principal Amount and Lost Earnings and such 
expenses of correction as closing costs, prepayment penalties, or sale 
or purchase costs associated with correcting the transaction.
    (3) The principle of paragraph (c)(1) of this section is 
illustrated in the following example and in paragraph (d) below:
    Example. The plan fiduciaries did not obtain a required independent 
appraisal in connection with a transaction described in section 7. In 
connection with correcting the transaction, the plan fiduciaries now 
propose to have the appraisal performed as of the date of purchase. The 
plan document permits the plan to pay reasonable and necessary 
expenses; the fiduciaries have objectively determined that the cost of 
the proposed appraisal is reasonable and is not more expensive than the 
cost of an appraisal contemporaneous with the purchase. The plan may 
therefore pay for this appraisal. However, the plan may not pay any 
costs associated with recalculating participant account balances to 
take into account the new valuation. There would be no need for these 
additional calculations or any increased appraisal cost if the plan's 
assets had been valued properly at the time of the purchase. Therefore, 
the cost of recalculating the plan participants' account balances is 
not a reasonable plan expense but is part of the costs of correction.
    (d) Distributions. Plans will have to make supplemental 
distributions to former employees, beneficiaries receiving benefits, or 
alternate payees, if the original distributions were too low because of 
the Breach. In these situations, the Plan Official or plan 
administrator must determine who received distributions from the plan 
during the time period affected by the Breach, recalculate the account 
balances, and determine the amount of the underpayment to each affected 
individual. The applicant must demonstrate proof of payment to 
participants and beneficiaries whose current location is known to the 
plan and/or applicant. For individuals whose location is unknown, 
applicants must demonstrate that they have segregated adequate funds to 
pay the missing individuals and that the applicant has commenced the 
process of locating the missing individuals using methods involving 
nominal expense such as certified mail and electronic search 
technologies as well as checking related plan records and with any 
designated plan beneficiary. If these methods are unsuccessful, the 
applicant should consider the use of commercial locator services, 
credit reporting agencies, information brokers and investigation 
databases as well as analogous computer services depending on the 
amount of underpayment in relation to the cost of the services. The 
costs of such efforts are part of the costs of correction. See Missing 
Participants--Best Practices for Pension Plans (available at 
www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/retirement/missing-participants-guidance) for more 
information on fiduciary best practices that based on EBSA's experience 
working with plans have proven effective at minimizing and mitigating 
the problem of missing or nonresponsive participants.
    (e) De Minimis Exception. Where correction under the Program 
requires distributions in amounts less than $35 to former employees, 
their beneficiaries and alternate payees, who neither have account 
balances with, nor have a right to future benefits from the plan, and 
the applicant demonstrates in its submission that the cost of making 
the distribution to each such individual exceeds the amount of the 
payment to which such individual is entitled in connection with the 
correction of the transaction that is the subject of the application, 
the applicant need not make distributions to such individuals who would 
receive less than $35 each as part of the correction. However, the 
applicant must pay to the plan as a whole the total of such de minimis 
amounts not distributed to such individuals.
    Example. Employer X sponsors Plan Y. Employer X submits an 
application under the VFC Program to correct a failure to timely 
forward participant contributions to Plan Y. Employer X had paid the 
delinquent contributions six months late but had not paid Lost Earnings 
on the delinquency. The correction under the VFC Program, therefore, 
required only payment of Lost Earnings for the six-month delinquency. 
During the six-month period 25 employees separated from service and 
rolled over their plan accounts to individual retirement accounts. The 
amount of Lost Earnings due to 20 of those former employees is less 
than $35, and Employer X demonstrates that the cost of making the 
distribution to those former employees is $42 per individual. Employer 
X need not make distributions to those 20 former employees. However, 
the total amount of distributions that

[[Page 4215]]

would have been due to those former employees must be paid to Plan Y. 
The payment to Plan Y may be used for any purpose that payments or 
credits, which are not allocated directly to participant accounts, are 
used.\65\ Employer X must make distributions to the five former 
employees who are entitled to receive distributions of more than $35.
---------------------------------------------------------------------------

    \65\ For example, the Department has taken the position that 
where a plan document is silent as to the payment of reasonable 
administrative expenses, the plan may pay reasonable administrative 
expenses. Where a plan document provides that the employer will pay 
any such expenses, and if the employer has reserved the right to 
amend the plan document, ERISA would not prevent the employer from 
amending the plan to require, prospectively, that the relevant 
expenses be paid by the plan. The Department does not believe that 
ERISA would permit a fiduciary to implement a plan amendment that 
attempted to retroactively relieve the employer of an obligation to 
pay plan expenses.
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Section 6. VFC Program Application and Self-Correction Component 
Procedures

6.1 VFC Program Application Procedures

    (a) In general. Each application must adhere to the requirements 
set forth below. Failure to do so may render the application invalid.
    (b) Applicant. The application must be prepared by a Plan Official 
or an authorized representative (e.g., attorney, accountant, or other 
service provider). If a representative of the Plan Official is 
submitting the application, the application must include a statement 
signed by the Plan Official that the representative is authorized to 
represent the Plan Official. Any fees paid to such representative for 
services relating to the preparation and submission of the application 
may not be paid from plan assets, including charges to participants 
accounts or plan forfeiture accounts.
    (c) Contact person. Each application must include the name, address 
(street and email) and telephone number of a contact person. The 
contact person must be familiar with the contents of the application 
and have authority to respond to inquiries from EBSA.
    (d) Detailed narrative. The applicant must provide to EBSA a 
detailed narrative describing the Breach and the corrective action. The 
narrative must include:
    (1) A list of all persons materially involved in the Breach and its 
correction (e.g., fiduciaries, service providers, borrowers);
    (2) The plan sponsor's nine-digit number (EIN), plan number, and 
address of the plan sponsor and administrator;
    (3) The date the plan's most recent Form 5500 was filed; or, in the 
case of a bulk VFC Program application, for each plan named in the 
application, either the date the most recent Form 5500 was filed or the 
plan sponsor's nine-digit number (EIN);
    (4) An explanation of the Breach, including the date it occurred;
    (5) An explanation of how the Breach was corrected, by whom and 
when; and
    (6)(i) If the applicant performs a manual calculation in accordance 
with paragraphs (b)(6)(i) through (iv) of section 5 or paragraphs 
(b)(7)(i) through (iii), specific calculations demonstrating how 
Principal Amount and Lost Earnings or, if applicable, Restoration of 
Profits were computed;
    (ii) If the applicant uses the Online Calculator in accordance with 
paragraph (b)(8) of section 5, the data elements required to be input 
into the Online Calculator under paragraphs (b)(8)(i) and/or (ii) of 
section 5, as applicable (to satisfy this requirement, applicants may 
submit a copy of the page(s) that results from the ``View Printable 
Results'' function used after inputting data elements and completing 
use of the Online Calculator); and
    (iii) An explanation of why payment of Lost Earnings or Restoration 
of Profits was chosen to correct the Breach.
    (e) Supporting documentation. The applicant must also include:
    (1) Copies of the relevant portions of the plan document and any 
other pertinent documents (such as the adoption agreement, trust 
agreement, or insurance contract); \66\
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    \66\ Applicants must supply complete copies of the plan 
documents and other pertinent documents if requested by EBSA during 
its review of the application.
---------------------------------------------------------------------------

    (2) Documentation that supports the narrative description of the 
transaction and its correction;
    (3) Documentation establishing the Lost Earnings amount;
    (4) Documentation establishing the amount of Restoration of 
Profits, if applicable;
    (5) All documents described in section 7 with respect to the 
transaction involved; and
    (6) Proof of payment of Principal Amount and Lost Earnings or 
Restoration of Profits.
    Applicants using the Online Calculator may satisfy the requirements 
of paragraph (e)(3) above, with respect to Lost Earnings, and paragraph 
(e)(4) above, as to the amount of interest, if any, payable with 
respect to the profit amount, by complying with the requirements of 
paragraph (d)(6)(ii) of this section. Except for proof of payment, as 
described in paragraph (e)(6) above, applicants correcting participant 
loan transactions in section 7.3(a) and (b) are not required to submit 
the other documentation described above unless requested by EBSA.
    (f) Examples of supporting documentation. (1) Examples of 
documentation supporting the description of the transaction and 
correction are leases, appraisals, notes and loan documents, service 
provider contracts, invoices, settlement documents, deeds, perfected 
security interests, and amended annual reports.
    (2) Examples of acceptable proof of payment include copies of 
canceled checks, executed wire transfers, a signed, dated receipt from 
the recipient of funds transferred to the plan (such as a financial 
institution), and bank statements for the plan's account.
    (g) Penalty of Perjury Statement. Each application must include the 
following statement: ``Under penalties of perjury I certify that I am 
not Under Investigation (as defined in section 3(b)(3) of the VFC 
Program) and that I have reviewed this application, including all 
supporting documentation, and to the best of my knowledge and belief 
the contents are true, correct, and complete.''
    (1) Applicants in general. The Penalty of Perjury Statement must be 
signed and dated by a plan fiduciary with knowledge of the transaction 
that is the subject of the application and the authorized 
representative of the applicant, if any. In addition, each Plan 
Official applying under the VFC Program must sign and date the Penalty 
of Perjury Statement. The statement must accompany the application and 
any subsequent additions to the application. Use of the Penalty of 
Perjury Statement included with the Model Application Form in Appendix 
E will satisfy the requirements of paragraph (g) of this section.
    (2) Bulk Applicants. The Penalty of Perjury Statement must be 
signed and dated by the bulk applicant with knowledge of the 
transaction that is the subject of the application and the authorized 
representative of the bulk applicant, if any. The statement must 
accompany the application and any subsequent additions to the 
application. Use of the Penalty of Perjury Statement included with the 
Model Application Form in Appendix E will satisfy the requirements of 
paragraph (g) of this section.
    (3) Contributing or Adopting Employers in Multiemployer Plans or 
Multiple Employer Plans. In the case of an employer that contributes to 
or has adopted a multiemployer plan or multiple employer plan and 
wishes to correct a Breach, the Penalty of Perjury Statement may be 
signed and dated by

[[Page 4216]]

the employer and, regardless of the employer's status as a plan 
fiduciary, the Penalty of Perjury Statement need not be signed by 
another plan fiduciary.
    (h) Checklist. The checklist in Appendix B must be completed, 
signed, dated and submitted with the application. Use of the checklist 
included with the Model Application Form in Appendix E also will 
satisfy the requirements of paragraph (h) of this section.
    (i) Where to apply. The application shall be submitted to the 
appropriate EBSA Regional Office listed in Appendix C. Applicants 
should check with the relevant EBSA Regional Office whether the office 
accepts email submissions of applications and supporting documentation.
    (j) Submission of Additional Documentation. If EBSA determines that 
required information is missing from the application or that additional 
documentation is needed to complete EBSA's review, EBSA will request 
such documentation in writing from the applicant or authorized 
representative. If EBSA does not receive the requested documentation 
within a time period specified in writing by the EBSA reviewer, EBSA 
may suspend its review of the application and consider appropriate 
action. EBSA will notify the applicant or authorized representative in 
writing regarding such suspension. If EBSA does not receive the 
requested documentation within a reasonable time after providing notice 
of the suspension, EBSA will issue a rejection letter.
    (k) Recordkeeping. The applicant must maintain copies of the 
application and any subsequent correspondence with EBSA for the period 
required by section 107 of ERISA.

6.2 VFC Program Self-Correction Component Procedures

    (a) In general. Each self-corrector must adhere to the requirements 
set forth below. Failure to do so may render the self-correction 
invalid.
    (b) Self-corrector. The SCC notice must be submitted by the self-
corrector who is a Plan Official or an authorized representative (e.g., 
attorney, accountant, or other service provider). If a representative 
of the Plan Official is submitting the SCC notice, the plan 
administrator must retain a statement signed by the Plan Official that 
the representative is authorized to represent the Plan Official. Use of 
the model authorization included in the SCC Retention Record Checklist 
in Appendix F will satisfy this requirement. Any fees paid to such 
representative for services relating to the correction under the SCC 
may not be paid from plan assets.
    (c) Submission of SCC notice. The self-corrector must notify EBSA 
of participation in the SCC by submitting the SCC notice through the 
online VFC Program web tool in accordance with paragraphs 
7.1(b)(2)(iii) and 7.3(c)(2)(ii).\67\ EBSA will acknowledge receipt of 
a properly completed and submitted SCC notice in an email addressed to 
the self-corrector.
---------------------------------------------------------------------------

    \67\ The online VFC Program web tool will be located on EBSA's 
website.
---------------------------------------------------------------------------

    (d) SCC Retention Record Checklist--Applicable to Self-Corrections 
under section 7.1(b). The self-corrector of delinquent participant 
contributions and loan repayments under section 7.1(b) must complete 
the SCC Retention Record Checklist in Appendix F, prepare or collect 
the documents listed in this Appendix, and provide copies of the 
completed checklist and required documentation to the plan 
administrator.
    (e) Penalty of Perjury Statement for Self-Corrections under Section 
7.1(b). The plan administrator must retain the following statement: 
``Under penalties of perjury I certify that I am not Under 
Investigation (as defined in section 3(b)(3) of the VFC Program) and 
that I have reviewed the SCC notice acknowledgment and summary, the 
checklist and all the required documentation, and to the best of my 
knowledge and belief the contents are true, correct, and complete.'' 
The statement must be signed and dated by a plan fiduciary with 
knowledge of the transaction that is the subject of the self-correction 
and the authorized representative of the plan sponsor, if any. In 
addition, each Plan Official who is seeking the relief afforded under 
the Program must sign and date the Penalty of Perjury Statement. Use of 
the Penalty of Perjury Statement included in Appendix F will satisfy 
the requirements of paragraph (e) of this section.
    (f) Penalty of Perjury Statement for Self-Corrections under Section 
7.3(c). The plan administrator must retain the following statement: 
``Under penalties of perjury I certify that I have reviewed the SCC 
notice acknowledgment and summary, and all the required documentation, 
and to the best of my knowledge and belief the contents are true, 
correct, and complete.'' The statement must be signed and dated by a 
plan fiduciary with knowledge of the transaction that is the subject of 
the self-correction and the authorized representative of the plan 
sponsor, if any. In addition, each Plan Official who is seeking the 
relief afforded under the Program must sign and date the Penalty of 
Perjury Statement.
    (g) Contributing or Adopting Employers in Multiemployer Plans or 
Multiple Employer Plans. In the case of an employer that contributes to 
or has adopted a multiemployer plan or multiple employer plan and 
wishes to self-correct a Breach, the Penalty of Perjury Statement may 
be signed and dated by the employer and, regardless of the employer's 
status as a plan fiduciary, the Penalty of Perjury Statement need not 
be signed by another plan fiduciary.
    (h) Recordkeeping.
    (1) For self-corrections of delinquent participant contributions 
and loan repayments under section 7.1(b), the plan administrator must 
retain a copy of the SCC Retention Record Checklist in Appendix F along 
with copies of the required documentation, the authorization form, if 
any, and a signed Penalty of Perjury Statement, for the period required 
by section 107 of ERISA.
    (2) For self-corrections of participant loan failures under section 
7.3(c), the plan administrator must retain proof of payment of 
Principal Amount and Lost Earnings, or Restoration of Profits, as 
applicable; a copy of the SCC Notice Acknowledgment and Summary page; 
the authorization form, if any; and a signed Penalty of Perjury 
Statement, for the period required by section 107 of ERISA.

Section 7. Description of Eligible Transactions and Corrections Under 
the VFC Program

    EBSA has identified certain Breaches and methods of correction that 
are suitable for the VFC Program. Any Plan Official may correct a 
Breach listed in this section in accordance with section 5 and the 
applicable correction method. The correction methods set forth are 
strictly construed and are the only acceptable correction methods under 
the VFC Program and the SCC for the identified transactions described 
in this section.

7.1 Delinquent Remittance of Participant Funds

(a) Delinquent Participant Contributions and Loan Repayments to Pension 
Plans Under VFC Program Applications
    (1) Description of Transaction. An employer receives directly from 
participants, or withholds from employees' paychecks, certain amounts 
for either participants' contribution to a pension plan or for 
repayment of participants' plan loans. Instead of forwarding such 
contributions or loan

[[Page 4217]]

repayments to the plan for investment in accordance with the provisions 
of the plan and by reference to the principles of the Department's 
regulation at 29 CFR 2510.3-102, the employer retains such amounts for 
a longer period of time.
    (2) Correction of Transaction. (i) Unpaid Participant Contributions 
or Loan Repayments. Pay to the plan the Principal Amount plus the 
greater of (A) Lost Earnings on the Principal Amount or (B) Restoration 
of Profits resulting from the employer's use of the Principal Amount, 
as described in section 5(b). The Loss Date for such contributions or 
repayments is the date on which each contribution reasonably could have 
been segregated from the employer's general assets. In no event shall 
the Loss Date for such contributions or repayments be later than the 
applicable maximum time period described in 29 CFR 2510.3-102.\68\ Any 
penalties, late fees or other charges shall be paid by the employer or 
another Plan Official and not from such contributions or loan 
repayments.
---------------------------------------------------------------------------

    \68\ The Department amended paragraph (a)(1) of 29 CFR 2510.3-
102 to extend the application of the regulation to amounts paid by a 
participant or beneficiary or withheld by an employer from a 
participant's wages for purposes of repaying a participant's loan 
(regardless of plan size). 75 FR 2068 (2010).
---------------------------------------------------------------------------

    (ii) Late Participant Contributions or Loan Repayments. If 
participant contributions or loan repayments were remitted to the plan 
outside of the time periods described above, the only correction 
required is to pay to the plan the greater of (A) Lost Earnings or (B) 
Restoration of Profits resulting from the employer's use of the 
Principal Amount as described in section 5(b). Any penalties, late fees 
or other charges shall be paid by the employer or another Plan Official 
and not from participant contributions or loan repayments.
    (iii) For this transaction, the Principal Amount is the amount of 
delinquent participant contributions or loan repayments retained by the 
employer.
    (iv) Example. The principles of paragraph (a)(2) of this section 
are illustrated by example in Appendix D.
    (3) Documentation. In addition to the documentation required by 
section 6.1, submit the following documents:
    (i) A statement from a Plan Official identifying the earliest date 
on which the participant contributions and/or repayments reasonably 
could have been segregated from the employer's general assets, along 
with the supporting documentation on which the Plan Official relied in 
reaching this conclusion;
    (ii) If restored participant contributions and/or repayments 
(exclusive of Lost Earnings) either total $50,000 or less, or exceed 
$50,000 and were remitted to the plan within 180 calendar days from the 
date such amounts were received by the employer, or the date such 
amounts otherwise would have been payable to the participants in cash 
(regarding amounts withheld by an employer from employees' paychecks), 
submit:
    (A) A narrative describing the applicant's contribution and/or 
repayment remittance practices before and after the period of unpaid or 
late contributions and/or repayments including any steps taken to 
prevent future delinquencies, and
    (B) Summary documents demonstrating the amount of unpaid or late 
contributions and/or repayments; and
    (iii) If restored participant contributions and/or repayments 
(exclusive of Lost Earnings) exceed $50,000 and were remitted to the 
plan more than 180 calendar days after the date such amounts were 
received by the employer, or the date such amounts otherwise would have 
been payable to the participants in cash (regarding amounts withheld by 
an employer from employees' paychecks), submit:
    (A) A narrative describing the applicant's contribution and/or 
repayment remittance practices before and after the period of unpaid or 
late contributions and/or repayments including any steps taken to 
prevent future delinquencies;
    (B) For participant contributions and/or repayments received from 
participants, a copy of the accounting records which identify the date 
and amount of each contribution received; and
    (C) For participant contributions and/or repayments withheld from 
employees' paychecks, a copy of the payroll documents showing the date 
and amount of each withholding.
(b) Delinquent Participant Contributions and Loan Repayments to Pension 
Plans Under the Self-Correction Component
    (1) Description of Transaction. (i) An employer receives directly 
from participants, or withholds from employees' paychecks, certain 
amounts for either participants' contribution to a pension plan or for 
repayment of participants' plan loans. Instead of forwarding such 
contributions or loan repayments to the plan for investment in 
accordance with the provisions of the plan and by reference to the 
principles of the Department's regulation at 29 CFR 2510.3-102, the 
employer retains such amounts for a longer period of time.\69\
---------------------------------------------------------------------------

    \69\ See 29 CFR 2510.3-102(a)(2), 75 FR 2068 (2010).
---------------------------------------------------------------------------

    (ii) For this transaction: (A) the amount of Lost Earnings 
resulting from the correction of the delinquent participant 
contributions or loan repayments is less than or equal to $1,000, 
excluding any excise tax amounts paid to the plan under the related 
class exemption PTE 2002-51; and
    (B) the delinquent participant contributions or loan repayments 
were remitted to the plan within 180 calendar days from the date such 
amounts were received by the employer, or the date such amounts 
otherwise would have been payable to the participants in cash 
(regarding amounts withheld by an employer from employees' paychecks).
    (2) Correction of Transaction. (i) Unpaid Participant Contributions 
or Loan Repayments. Pay to the plan the Principal Amount plus Lost 
Earnings on the Principal Amount as described in section (5)(b). The 
Loss Date for such contributions or repayments is the Date of 
Withholding or Receipt in accordance with section 5(b)(3)(ii). All 
calculations must be made using the Online Calculator in accordance 
with section 5(b)(6)(vi). Any penalties, late fees or other charges 
shall be paid by the employer or other Plan Official and not from 
participant loan repayments.
    (ii) Principal Amount. For this transaction, the Principal Amount 
is the amount of delinquent participant contributions or loan 
repayments retained by the employer.
    (iii) SCC Notice. The self-corrector must input the required 
information in the fields provided in the SCC notice and submit the 
notice to EBSA through the online VFC Program web tool.\70\ The 
required information includes certain data elements listed below:
---------------------------------------------------------------------------

    \70\ The online VFC Program web tool will be located on EBSA's 
website.
---------------------------------------------------------------------------

    (A) name and email address of the self-corrector;
    (B) plan name;
    (C) plan sponsor's nine-digit number (EIN) and the plan's three-
digit number (PN);
    (D) Principal Amount;
    (E) amount of Lost Earnings and the date paid to the plan;
    (F) Loss Date (Date(s) of Withholding or Receipt); and
    (G) number of participants affected by the correction.
    (3) Documentation. The self-corrector must complete the SCC 
Retention Record Checklist in Appendix F, prepare or collect the 
documents listed

[[Page 4218]]

in this Appendix, and provide copies of the completed checklist and 
required documentation to the plan administrator.
(c) Delinquent Participant Contributions to Insured Welfare Plans
    (1) Description of Transaction. Benefits are provided exclusively 
through insurance contracts issued by an insurance company or similar 
organization licensed to do business in any state or through a health 
maintenance organization (HMO) defined in section 1310(c) of the Public 
Health Service Act, 42 U.S.C. 300e-9(c). An employer receives directly 
from participants or withholds from employees' paychecks certain 
amounts that the employer forwards to an insurance provider for the 
purpose of providing group health or other welfare benefits. The 
employer fails to forward such amounts in accordance with the terms of 
the plan (including the provisions of any insurance contract) or the 
requirements of the Department's regulation at 29 CFR 2510.3-102. There 
are no instances in which claims have been denied under the plan, nor 
has there been any lapse in coverage, due to the failure to transmit 
participant contributions on a timely basis.
    (2) Correction of Transaction. (i) Pay to the insurance provider or 
HMO the Principal Amount, as well as any penalties, late fees, or other 
charges necessary to prevent a lapse in coverage due to such failure. 
Any penalties, late fees or other such charges shall be paid by the 
employer or a Plan Official and not from participant contributions.
    (ii) For this transaction, the Principal Amount is the amount of 
delinquent participant contributions retained by the employer.
    (3) Documentation. In addition to the documentation required by 
section 6.1, submit the following documents:
    (i) A statement from a Plan Official: (A) identifying the earliest 
date on which the participant contributions reasonably could have been 
segregated from the employer's general assets, along with the 
supporting documentation on which the Plan Official relied in reaching 
this conclusion; (B) attesting that there are no instances in which 
claims have been denied under the plan for nonpayment, nor has there 
been any lapse in coverage; and (C) attesting that any penalties, late 
fees or other such charges have been paid by the Plan Official and not 
from participant contributions;
    (ii) Copies of the insurance contract or contracts for the group 
health or other welfare benefits for the plan;
    (iii) If restored participant contributions either total $50,000 or 
less, or exceed $50,000 and were remitted to the insurance provider 
within 180 calendar days from the date such amounts were received by 
the employer, or the date such amounts otherwise would have been 
payable to the participants in cash (regarding amounts withheld by an 
employer from employees' paychecks), submit:
    (A) a narrative describing the applicant's contribution practices 
before and after the period of unpaid or late contributions, and
    (B) summary documents demonstrating the amount of unpaid or late 
contributions; and
    (iv) If restored participant contributions exceed $50,000 and were 
remitted to the insurance provider more than 180 calendar days after 
the date such amounts were received by the employer, or the date such 
amounts otherwise would have been payable to the participants in cash 
(regarding amounts withheld by an employer from employees' paychecks), 
submit:
    (A) a narrative describing the applicant's contribution remittance 
practices before and after the period of unpaid or late contributions 
including any steps taken to prevent future delinquencies,
    (B) for participant contributions received directly from 
participants, a copy of the accounting records which identify the date 
and amount of each contribution received, and
    (C) for participant contributions withheld from employees' 
paychecks, a copy of the payroll documents showing the date and amount 
of each withholding.
(d) Delinquent Participant Contributions to Welfare Plan Trusts
    (1) Description of Transaction. An employer receives directly from 
participants or withholds from employees' paychecks certain amounts 
that the employer forwards to a trust maintained to provide, through 
insurance or otherwise, group health or other welfare benefits. The 
employer fails to forward such amounts in accordance with the terms of 
the plan or the requirements of the Department's regulation at 29 CFR 
2510.3-102. There are no instances in which claims have been denied 
under the plan, nor has there been any lapse in coverage, due to the 
failure to transmit participant contributions on a timely basis.
    (2) Correction of Transaction. (i) Unpaid Contributions. Pay to the 
trust (A) the Principal Amount, and, where applicable, any penalties, 
late fees, or other charges necessary to prevent a lapse in coverage 
due to the failure to make timely payments, and (B) the greater of (1) 
Lost Earnings on the Principal Amount or (2) Restoration of Profits 
resulting from the employer's use of the Principal Amount as described 
in section 5(b). The Loss Date for such contributions is the date on 
which each contribution would become plan assets under 29 CFR 2510.3-
102. Any penalties, late fees or other charges shall be paid by the 
employer or a Plan Official and not from participant contributions.
    (ii) Late Contributions. If participant contributions were remitted 
to the trust outside of the time period required by the regulation, the 
only correction required is to pay to the trust the greater of (A) Lost 
Earnings or (B) Restoration of Profits resulting from the employer's 
use of the Principal Amount as described in section 5(b). Any 
penalties, late fees or other such charges shall be paid by the 
employer or a Plan Official and not from participant contributions.
    (iii) For this transaction, the Principal Amount is the amount of 
delinquent participant contributions retained by the employer.
    (3) Documentation. In addition to the documentation required by 
section 6.1, submit the following documents:
    (i) A statement from a Plan Official: (A) identifying the earliest 
date on which the participant contributions reasonably could have been 
segregated from the employer's general assets, along with the 
supporting documentation on which the Plan Official relied in reaching 
this conclusion, and (B) attesting that there are no instances in which 
claims have been denied under the plan for nonpayment, nor has there 
been any lapse in coverage;
    (ii) If restored participant contributions (exclusive of Lost 
Earnings) either total $50,000 or less, or exceed $50,000 and were 
remitted to the trust within 180 calendar days from the date such 
amounts were received by the employer, or the date such amounts 
otherwise would have been payable to the participants in cash 
(regarding amounts withheld by an employer from employees' paychecks), 
submit:
    (A) a narrative describing the applicant's contribution practices 
before and after the period of unpaid or late contributions including 
any steps taken to prevent future delinquencies, and
    (B) summary documents demonstrating the amount of unpaid or late 
contributions; and
    (iii) If restored participant contributions (exclusive of Lost 
Earnings) exceed $50,000 and were remitted to the trust more than 180

[[Page 4219]]

calendar days after the date such amounts were received by the 
employer, or the date such amounts otherwise would have been payable to 
the participants in cash (regarding amounts withheld by an employer 
from employees' paychecks), submit:
    (A) a narrative describing the applicant's contribution remittance 
practices before and after the period of unpaid or late contributions,
    (B) for participant contributions received directly from 
participants, a copy of the accounting records which identify the date 
and amount of each contribution received, and
    (C) for participant contributions withheld from employees' 
paychecks, a copy of the payroll documents showing the date and amount 
of each withholding.

7.2 Loans

(a) Loan at Fair Market Interest Rate to a Party in Interest With 
Respect to the Plan
    (1) Description of Transaction. A plan made a loan to a party in 
interest at an interest rate no less than that for loans with similar 
terms (for example, the amount of the loan, amount and type of 
security, repayment schedule, and duration of loan) to a borrower of 
similar creditworthiness. The loan was not exempt from the prohibited 
transaction provisions of Title I of ERISA.
    (2) Correction of Transaction. Pay off the loan in full, including 
any prepayment penalties. An independent commercial lender must also 
confirm in writing that the loan was made at a fair market interest 
rate for a loan with similar terms to a borrower of similar 
creditworthiness.
    (3) Documentation. In addition to the documentation required by 
section 6.1, submit a narrative describing the process used to 
determine the fair market interest rate at the time the loan was made, 
validated in writing by an independent commercial lender.
(b) Loan at Below-Market Interest Rate to a Party in Interest With 
Respect to the Plan
    (1) Description of Transaction. A plan made a loan to a party in 
interest with respect to the plan at an interest rate that, at the time 
the loan was made, was less than the fair market interest rate for 
loans with similar terms (for example, the amount of loan, amount and 
type of security, repayment schedule, and duration of the loan) to a 
borrower of similar creditworthiness. The loan was not exempt from the 
prohibited transaction provisions of Title I of ERISA.
    (2) Correction of Transaction. (i) Pay off the loan in full, 
including any prepayment penalties. Pay to the plan the Principal 
Amount, plus the greater of (A) the Lost Earnings as described in 
section 5(b), or (B) the Restoration of Profits, if any, as described 
in section 5(b).
    (ii) For purposes of this transaction, each loan payment has a 
Principal Amount equal to the excess of the loan payment that would 
have been received if the loan had been made at the fair market 
interest rate (from the beginning of the loan until the Recovery Date) 
over the loan payment actually received under the loan terms during 
such period. Under the VFC Program, the fair market interest rate must 
be determined by an independent commercial lender.
    Example. The plan made to a party in interest a $150,000 mortgage 
loan, secured by a first Deed of Trust, at a fixed interest rate of 4% 
per annum. The loan was to be fully amortized over 30 years. The fair 
market interest rate for comparable loans, at the time this loan was 
made, was 7% per annum. The party in interest or Plan Official must 
repay the loan in full plus any applicable prepayment penalties. The 
party in interest or Plan Official also must pay the difference between 
what the plan would have received through the Recovery Date had the 
loan been made at 7% and what, in fact, the plan did receive from the 
commencement of the loan to the Recovery Date, plus Lost Earnings on 
that amount as described in section 5(b).
    (3) Documentation. In addition to the documentation required by 
section 6.1, submit the following documents:
    (i) A narrative describing the process used to determine the 
interest rate at the time the loan was made;
    (ii) A copy of the independent commercial lender's fair market 
interest rate determination(s); and
    (iii) A copy of the independent fiduciary's dated, written approval 
of the fair market interest rate determination(s), except for below-
market interest rate loans of $10,000 or less.
(c) Loan at Below-Market Interest Rate to a Person Who Is Not a Party 
in Interest With Respect to the Plan
    (1) Description of Transaction. A plan made a loan to a person who 
is not a party in interest with respect to the plan at an interest rate 
which, at the time the loan was made, was less than the fair market 
interest rate for loans with similar terms (for example, the amount of 
loan, amount and type of security, repayment schedule, and duration of 
the loan) to a borrower of similar creditworthiness.
    (2) Correction of Transaction. (i) Pay to the plan the Principal 
Amounts from the inception of the loan until the Recovery Date, plus 
Lost Earnings on the series of Principal Amounts through the Recovery 
Date, as described in section 5(b).
    (ii) In addition, the applicant or other party must pay to the plan 
the present value of the Principal Amounts from the Recovery Date to 
the maturity date of the loan, as determined by an independent 
commercial lender. The borrower must continue to pay to the plan the 
outstanding loan balance according to the repayment schedule for the 
duration of the loan. Alternatively, instead of the applicant or other 
party paying the present value of the Principal Amounts, the borrower 
may pay to the plan the outstanding loan balance amortized over the 
remaining payment schedule for the duration of the loan at the interest 
rate that would have been applicable if the loan had been made at the 
fair market interest rate.
    (iii) For purposes of this transaction, each loan payment has a 
Principal Amount equal to the excess of the loan payment that would 
have been received if the loan had been made at the fair market 
interest rate (from the inception of the loan until the Recovery Date) 
over the loan payment actually received under the loan terms during 
such period. Under the VFC Program, the fair market interest rate must 
be determined by an independent commercial lender.
    (iv) The principles of paragraph (c)(2) of this section are 
illustrated in the following example:
    Example. The plan made a $150,000 mortgage loan, secured by a first 
Deed of Trust, at a fixed interest rate of 4% per annum. The loan was 
to be fully amortized over 30 years. The fair market interest rate for 
comparable loans, at the time this loan was made, was 7% per annum. The 
applicant or other person must pay the excess of what the plan would 
have received through the Recovery Date had the loan been made at 7% 
over what, in fact, the plan did receive from the commencement of the 
loan to the Recovery Date (the Principal Amounts from the loan's 
inception until the Recovery Date), plus Lost Earnings on that amount 
as described in section 5(b). The applicant must also pay on the 
Recovery Date the present value of the difference of what the plan 
would have received between the 7% and the 4% interest rate for the 
remaining payments on the loan for the duration of the time the plan is 
owed repayments on the loan (the Principal Amounts from the Recovery 
Date until the loan's maturity

[[Page 4220]]

date). The borrower must continue to repay the outstanding loan balance 
based on the loan's repayment schedule.
    (3) Documentation. In addition to the documentation required by 
section 6.1, submit the following documents:
    (i) A narrative describing the process used to determine the 
interest rate at the time the loan was made;
    (ii) A copy of the independent commercial lender's fair market 
interest rate determination(s); and
    (iii) If applicable, a copy of the loan repayment schedule for the 
re-amortized loan repayments.
(d) Loan at Below-Market Interest Rate Solely Due to a Delay in 
Perfecting the Plan's Security Interest
    (1) Description of Transaction. For purposes of the VFC Program, if 
a plan made a purportedly secured loan to a person who is not a party 
in interest with respect to the plan, but there was a delay in 
recording or otherwise perfecting the plan's interest in the loan 
collateral, the loan will be treated as an unsecured loan until the 
plan's security interest is perfected.
    (2) Correction of Transaction. (i) Pay to the plan the Principal 
Amounts through the date the loan became fully secured, plus Lost 
Earnings on the series of Principal Amounts, as described in section 
5(b).
    (ii) Record or perfect the plan's interest in the loan collateral.
    (iii) In addition, if the delay in perfecting the loan's security 
caused a permanent change in the risk characteristics of the loan, the 
fair market interest rate for the remaining term of the loan must be 
determined by an independent commercial lender. In that case the 
correction amount includes an additional payment to the plan. The 
applicant must pay to the plan the present value of the Principal 
Amounts from the date the loan is fully secured to the maturity date of 
the loan, as determined by an independent commercial lender. The 
borrower must continue to pay to the plan the outstanding loan balance 
according to the repayment schedule for the duration of the loan. 
Alternatively, instead of the applicant paying the present value of the 
Principal Amounts, the borrower may pay to the plan the outstanding 
loan balance amortized over the remaining payment schedule for the 
duration of the loan at the interest rate that would have been 
applicable if the loan had been made at the fair market interest rate 
that would have been applicable for a loan with the changed risk 
characteristics.
    (iv) For purposes of this transaction, each loan payment has a 
Principal Amount equal to the excess of the loan payment that would 
have been received if the loan had been made at the fair market 
interest rate for an unsecured loan (from the inception of the loan 
until the Recovery Date) over the loan payment actually received under 
the loan terms during such period. Under the VFC Program, the fair 
market interest rate must be determined by an independent commercial 
lender.
    (v) The principles of paragraph (d)(2) of this section are 
illustrated in the following examples:
    Example 1. The plan made a mortgage loan, which was supposed to be 
secured by a Deed of Trust. The plan's Deed was not recorded for six 
months, but, when it was recorded, the Deed was in first position. The 
interest rate on the loan was the fair market interest rate for a 
mortgage loan secured by a first-position Deed of Trust. The loan is 
treated as an unsecured, below-market loan for the six months prior to 
the recording of the Deed of Trust.
    Example 2. Assume the same facts as in Example 1, except that, as a 
result of the delay in recording the Deed, the plan ended up in second 
position behind another lender. The risk to the plan is higher and the 
interest rate on the note is no longer commensurate with that risk. The 
loan is treated as a below-market loan (based on the lack of security) 
for the six months prior to the recording of the Deed of Trust and as a 
below-market loan (based on secondary status security) from the time 
the Deed is recorded until the end of the loan.
    (3) Documentation. In addition to the documentation required by 
section 6.1, submit the following documents:
    (i) A narrative describing the process used to determine the fair 
market interest rate for the period that the loan was unsecured and, if 
applicable, for the remaining term of the loan;
    (ii) A copy of the independent commercial lender's fair market 
interest rate determination(s); and
    (iii) If applicable, a copy of the loan repayment schedule for the 
re-amortized loan repayments.

7.3 Participant Loans

(a) Loans Failing To Comply With Plan Provisions for Amount, Duration, 
or Level Amortization Corrected Under VFC Program Applications
    (1) Description of Transaction. A plan extended a loan to a plan 
participant who is a party in interest with respect to the plan based 
solely on their status as an employee of any employer whose employees 
are covered by the plan, as defined in section 3(14)(H) of ERISA. The 
loan was a prohibited transaction that failed to qualify for ERISA's 
statutory exemption for plan loan programs because the loan terms did 
not comply with applicable plan provisions, which incorporated the 
requirements of section 72(p) of the Code concerning:
    (i) the amount of the loan,
    (ii) the duration of the loan, or
    (iii) the level amortization of the loan repayment.
    (2) Correction of Transaction. Plan Officials must make a voluntary 
correction of the loan with IRS approval under the Voluntary Correction 
Program of the IRS's EPCRS.
    (3) Documentation. The applicant is not required to submit any of 
the supporting documentation listed in section 6.1(e) unless otherwise 
requested by EBSA, except that the applicant must provide (i) proof of 
payment, as described in paragraph (e)(6) of section 6.1, and (ii) a 
copy of the IRS compliance statement.
(b) Default Loans Corrected Under VFC Program Applications
    (1) Description of Transaction. A plan extended a loan to a plan 
participant who is a party in interest with respect to the plan based 
solely on their status as an employee of any employer whose employees 
are covered by the plan, as defined in section 3(14)(H) of ERISA. At 
origination, the loan qualified for ERISA's statutory exemption for 
plan loan programs because the loan complied with applicable plan 
provisions, which incorporated the requirements of section 72(p) of the 
Code. During the loan repayment period, the Plan Official responsible 
for loan administration failed to properly withhold a number of loan 
repayments from the participant's wages and included the amount of such 
repayments in the participant's wages based on administrative or 
systems processing errors. The failure to withhold is a Breach causing 
the loan to become non-compliant with applicable plan provisions, which 
incorporated the requirements of section 72(p) of the Code.
    (2) Correction of Transaction. Plan Officials must make a voluntary 
correction of the loan with IRS approval under the Voluntary Correction 
Program of the IRS's EPCRS.
    (3) Documentation. The applicant is not required to submit any of 
the supporting documentation listed in section 6.1(e) unless otherwise 
requested by EBSA, except that the applicant must provide (i) proof of 
payment, as described in paragraph (e)(6) of section 6.1, and (ii) a 
copy of the IRS compliance statement.

[[Page 4221]]

(c) Eligible Inadvertent Participant Loan Failures Under the Self-
Correction Component
    (1) Description of Transaction. A plan extended a loan to a plan 
participant who is a party in interest with respect to the plan based 
solely on their status as an employee of any employer whose employees 
are covered by the plan, as defined in section 3(14)(H) of ERISA. There 
is an Eligible Inadvertent Participant Loan Failure that involves a 
Breach as defined in section 3(b)(1) of the Program. An Eligible 
Inadvertent Participant Loan Failure is a participant loan failure that 
occurs despite the existence of practices and procedures that satisfy 
the standards set forth in, and is eligible for self-correction under, 
the IRS's EPCRS. An Eligible Inadvertent Participant Loan Failure shall 
not include any participant loan failure that is egregious, relates to 
the diversion or misuse of plan assets, or is directly or indirectly 
related to an abusive tax avoidance transaction.
    (2) Correction of Transaction. (i) Plan Officials must make a 
voluntary self-correction of the Eligible Inadvertent Participant Loan 
Failure under the Self-Correction Program (SCP) of the IRS's EPCRS.
    (ii) SCC Notice. The self-corrector must input the required 
information in the fields provided in the SCC notice and submit the 
notice electronically to EBSA through the online VFC Program web tool. 
The required information includes certain data elements listed below:
    (A) name and email address of the self-corrector;
    (B) plan name;
    (C) plan sponsor's nine-digit number (EIN) and the plan's three-
digit number (PN);
    (D) Type of participant loan failure;
    (E) Loan amount;
    (F) Date the failure is identified;
    (G) Date of correction;
    (H) Correction method; and
    (I) Number of participants affected by the correction.
    (3) Documentation. The self-corrector shall provide the plan 
administrator with copies of the documentation required under section 
6.2. Completion of the SCC Retention Record Checklist in Appendix F and 
supporting documents is not required.

7.4 Purchases, Sales and Exchanges

    (a) Purchase of an Asset (Including Real Property) by a Plan from a 
Party in Interest
    (1) Description of Transaction. A plan purchased an asset with cash 
from a party in interest with respect to the plan, in a transaction to 
which no prohibited transaction exemption applies.
    (2) Correction of Transaction. (i) The plan may sell the asset back 
to the party in interest who originally sold the asset to the plan \71\ 
or to a person who is not a party in interest. Whether the asset is 
sold to a person who is not a party in interest with respect to the 
plan or is sold back to the original seller, the plan must receive the 
higher of (A) the FMV of the asset at the time of resale, without a 
reduction for the costs of sale, plus restoration to the plan of the 
party in interest's investment return from the proceeds of the sale, to 
the extent they exceed the plan's net profits from owning the property; 
or (B) the Principal Amount, plus the greater of (1) Lost Earnings on 
the Principal Amount as described in section 5(b), or (2) the 
Restoration of Profits, if any, as described in section 5(b).
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    \71\ The resale of the same property to the party in interest 
from whom the asset was purchased is a reversal of the original 
prohibited transaction. The resale is not a new prohibited 
transaction and therefore does not require an exemption.
---------------------------------------------------------------------------

    (ii) As an alternative to the correction described in paragraph 
(a)(2)(i) above, the plan may retain the asset and receive (A) the 
greater of (1) Lost Earnings less any earnings received on the asset up 
to the Recovery Date or (2) the Restoration of Profits, if any, as 
described in section 5(b), on the Principal Amount, but only to the 
extent that such Lost Earnings or Restoration of Profits exceeds the 
difference between the FMV of the asset as of the Recovery Date and the 
original purchase price; and (B) the amount by which the Principal 
Amount exceeded the FMV of the asset (at the time of the original 
purchase), plus the greater of (1) Lost Earnings or (2) Restoration of 
Profits, if any, as described in section 5(b), on such excess; provided 
an independent fiduciary determines that the plan will realize a 
greater benefit from this correction than it would from the resale of 
the asset described in paragraph (a)(2)(i) above.
    (iii) As a cash settlement alternative, when the plan no longer 
owns the asset and the transaction cannot be reversed or the asset 
cannot be retained as described respectively in paragraphs (a)(2)(i) 
and (ii) above, the plan may accept in cash the amounts specified in 
(A) plus (B) where (A) is--the greater of (1) Lost Earnings less any 
earnings received on the asset up to the Recovery Date or (2) the 
Restoration of Profits, if any, as described in section 5(b), on the 
Principal Amount, and (3) with the resulting amount from (1) or (2) 
reduced by any profit if the asset were resold or matured at a gain, or 
increased by any loss including Lost Earnings on such loss if either 
the asset was resold at a loss or the plan otherwise ceased to own the 
asset (e.g., maturity; destruction); and (B) is--the amount by which 
the Principal Amount exceeded the FMV of the asset (at the time of the 
original purchase), plus the greater of (1) Lost Earnings or (2) 
Restoration of Profits, if any, as described in section 5(b), on such 
excess. If the plan sold the asset, the asset must have been sold upon 
the advice of an independent fiduciary and not in anticipation of 
applying under the VFC Program.
    (iv) For this transaction, the Principal Amount is the plan's 
original purchase price.
    (v) The principles of paragraph (a)(2) of this section are 
illustrated in the following examples:
    Example 1. A plan purchased a parcel of real property from the plan 
sponsor. The plan does not lease the property to any person. Instead, 
the plan uses the property as an office. The plan paid $120,000 for the 
property and $5,000 in transaction costs. As part of the correction, 
the Plan Official obtains two appraisals from a qualified, independent 
appraiser in order to determine the FMV of the property at the time of 
the purchase and at the time of the correction (the ``Recovery Date''). 
The FMV of the property at the time of purchase was $100,000 ($20,000 
less than the plan paid for the property). As of the Recovery Date, the 
appraiser values the property at $110,000. To correct the transaction, 
the plan sponsor repurchases the property for $120,000 with no 
reduction for the costs of sale and reimburses the plan for the $5,000 
in initial costs of sale. The plan sponsor also must pay the plan the 
greater of the plan's Lost Earnings or the sponsor's investment return 
on these amounts. The determination of an independent fiduciary is not 
required because the applicant is correcting the transaction by selling 
the asset back to the party in interest pursuant to paragraph (a)(2)(i) 
of this section.
    Example 2. On February 1, 2002, a plan purchased from a party in 
interest a parcel of commercial real estate for $120,000 and incurred 
$5,000 in costs of sale. The plan initially uses the property as an 
office. At the same time, it is discovered that the original purchase 
was a prohibited transaction, the plan enters into a lucrative lease 
with an unrelated party for use of the property to begin January 1 of 
the following year. Due to commercial developments in adjacent 
properties, the Plan Official believes that the property will increase 
in value and that the plan would be able

[[Page 4222]]

to obtain substantially increasing rental payments for the use of the 
property. As part of the correction, the Plan Official obtains two 
appraisals from a qualified, independent appraiser in order to 
determine the FMV of the asset at the time of the purchase and at the 
time of the correction (the ``Recovery Date''). The FMV of the property 
at the time of purchase was $120,000 (the same as the original purchase 
price). As of the Recovery Date, the property is valued at $150,000. 
Lost Earnings are calculated through September 30, 2005, the 
anticipated Recovery Date. The Online Calculator determined that Lost 
Earnings is $26,098.23 on the Principal Amount of $125,000 (purchase 
price plus transaction costs). There were no determinable profits. The 
increase in the FMV, $30,000, is greater than Lost Earnings or 
Restoration of Profits. Because the property is rapidly appreciating in 
value, and because the Plan Official expects to realize significant 
rental income from the property, the Plan Official would like to 
correct by retaining the property pursuant to paragraph (a)(2)(ii) of 
this section rather than selling the asset back to the party in 
interest pursuant to paragraph (a)(2)(i) of this section. The Plan 
Official must obtain a determination by an independent fiduciary that 
the plan will realize a greater benefit by retaining the asset than by 
selling the asset back to the party in interest. Because the original 
purchase price was the same as the FMV, and the increase in the FMV is 
greater than any earnings or investment return on the original purchase 
price, the only cash payment to the plan involved in this correction is 
the $5,000 in costs of sale, plus Lost Earnings.
    Example 3. The plan purchased bonds from a party in interest on 
November 30, 2011 (the ``Loss Date'') at a face value of $100,000 with 
a yield of 2% interest annually. The purchase was at FMV, and the 
bonds' maturity date was November 30, 2012. The plan received $102,000 
on November 30, 2012 (the ``Recovery Date''). In January 2013, the plan 
trustee realized that the original purchase was a prohibited 
transaction because the seller is a party in interest. There were no 
determinable profits. Under these facts, because the plan no longer 
owns the asset, the transaction cannot be reversed under paragraph 
(a)(2)(i) above. Similarly, the plan cannot use the correction under 
paragraph (a)(2)(ii) above. A Plan Official may correct the transaction 
under paragraph (a)(2)(iii) by paying to the plan on January 7, 2013 
(the ``Final Payment Date'') an amount of cash equal to the Lost 
Earnings as calculated using the Online Calculator less the interest 
paid on the bonds ($3,055.55-$2,000).
    (3) Documentation. In addition to the documentation required by 
section 6.1, submit the following documents:
    (i) Documentation of the plan's purchase of the asset, including 
the date of the purchase, the plan's purchase price, and the identity 
of the seller;
    (ii) A narrative describing the relationship between the original 
seller of the asset and the plan;
    (iii) The qualified, independent appraiser's report addressing the 
FMV of the asset purchased by the plan, both at the time of the 
original purchase and at the recovery date;
    (iv) If applicable, a report of the independent fiduciary's 
determination that the plan will realize a greater benefit by receiving 
the correction amount described in paragraph (a)(2)(ii) of this section 
than by reselling the asset pursuant to paragraph (a)(2)(i) of this 
section; and
    (v) In a transaction involving a cash settlement correction under 
section 7.4(a)(2)(iii) where the plan sold the asset, a statement by a 
Plan Official that the asset was sold upon the advice of an independent 
fiduciary and not in anticipation of applying under the VFC Program.
(b) Sale of an Asset (Including Real Property) by a Plan to a Party in 
Interest
    (1) Description of Transaction. A plan sold an asset for cash to a 
party in interest with respect to the plan, in a transaction to which 
no prohibited transaction exemption applies.
    (2) Correction of Transaction. (i) The plan may repurchase the 
asset from the party in interest \72\ at the lower of (A) the price for 
which it originally sold the property or (B) the FMV of the property as 
of the Recovery Date plus restoration to the plan of the party in 
interest's net profits from owning the property, to the extent they 
exceed the plan's investment return from the proceeds of the sale.
---------------------------------------------------------------------------

    \72\ The repurchase of the same property from the party in 
interest to whom the asset was sold is a reversal of the original 
prohibited transaction. The repurchase is not a new prohibited 
transaction and therefore does not require an individual prohibited 
transaction exemption.
---------------------------------------------------------------------------

    (ii) As an alternative to the correction described in paragraph 
(b)(2)(i) above, the plan may receive the Principal Amount plus the 
greater of (A) Lost Earnings as described in section 5(b) or (B) the 
Restoration of Profits, if any, as described in section 5(b), provided 
an independent fiduciary determines that the plan will realize a 
greater benefit from this correction than it would from the repurchase 
of the asset described in paragraph (b)(2)(i), or provided a Plan 
Official determines that the asset cannot be repurchased (e.g., 
maturity, destruction).
    (iii) For this transaction, the Principal Amount is the amount by 
which the FMV of the asset (at the time of the original sale) exceeds 
the original sale price.
    (iv) The principles of paragraph (b)(2) of this section are 
illustrated in the following examples:
    Example 1. A plan sold a parcel of unimproved real property to the 
plan sponsor. The sponsor did not make any profit on the use of the 
property. As part of the correction, the Plan Official obtains an 
appraisal of the property reflecting the FMV of the property as of the 
date of sale from a qualified, independent appraiser. The appraiser 
values the property at $130,000, although the plan sold the property to 
the plan sponsor for $120,000. The plan did not incur any transaction 
costs during the original sale. As of the Recovery Date, the appraiser 
values the property at $140,000. The plan corrects the transaction by 
repurchasing the property at the original sale price of $120,000, with 
the party in interest assuming the costs of the reversal of the sale 
transaction. The determination of an independent fiduciary is not 
required because the applicant is correcting the transaction by 
repurchasing the property from the party in interest pursuant to 
paragraph (b)(2)(i) of this section.
    Example 2. Assume the same facts as in Example 1, except that the 
appraiser values the property as of the Recovery Date at $100,000, and 
the plan fiduciaries believe that the property will continue to 
decrease in value based on environmental studies conducted in adjacent 
areas. Based on the determination of an independent fiduciary that the 
plan will realize a greater benefit by receiving the Principal Amount 
(FMV of the asset at the time of the original sale less the original 
sales price equals $10,000) plus the greater of Lost Earnings or 
Restoration of Profits, as described in section 5(b), the transaction 
is corrected by cash settlement pursuant to paragraph (b)(2)(ii) of 
this section, rather than by repurchasing the asset.
    (3) Documentation. In addition to the documentation required by 
section 6.1, submit the following documents:
    (i) Documentation of the plan's sale of the asset, including the 
date of the sale, the sales price, and the identity of the original 
purchaser;
    (ii) A narrative describing the relationship of the purchaser to 
the asset

[[Page 4223]]

and the relationship of the purchaser to the plan;
    (iii) The qualified, independent appraiser's report addressing the 
FMV of the property at the time of the sale from the plan and as of the 
Recovery Date; and
    (iv) If applicable, a report of the independent fiduciary's 
determination that the plan will realize a greater benefit by receiving 
the correction amount described in paragraph (b)(2)(ii) of this section 
than by repurchasing the asset pursuant to paragraph (b)(2)(i) of this 
section, or if the asset cannot be repurchased, a written explanation 
of such circumstance from the Plan Official making this determination.
(c) Sale and Leaseback of Real Property to Employer
    (1) Description of Transaction. The plan sponsor, or an affiliate 
of the plan sponsor, sold a parcel of real property to the plan, which 
then was leased back to the sponsor or affiliate, in a transaction that 
is not otherwise exempt.
    (2) Correction of Transaction. (i) The transaction must be 
corrected by the sale of the parcel of real property back to the plan 
sponsor or affiliate of the plan sponsor, or to a person who is not a 
party in interest with respect to the plan.\73\ The plan must receive 
the higher of (A) FMV of the asset at the time of resale, without a 
reduction for the costs of sale; or (B) the Principal Amount, plus the 
greater of (1) Lost Earnings on the Principal Amount as described in 
section 5(b), or (2) the Restoration of Profits, if any, as described 
in section 5(b).
---------------------------------------------------------------------------

    \73\ If the plan purchased the property from the plan sponsor or 
an affiliate of the plan sponsor, the sale of the same property back 
to the plan sponsor or affiliate is a reversal of the prohibited 
transaction. The sale is not a new prohibited transaction and 
therefore does not require an individual prohibited transaction 
exemption, as long as the plan did not make improvements while it 
owned the property.
---------------------------------------------------------------------------

    (ii) For purposes of this transaction, the Principal Amount is the 
plan's original purchase price.
    (iii) If the plan has not been receiving rent at FMV, as determined 
by a qualified, independent appraisal, the sale price of the real 
property should not be based on the historic below-market rent that was 
paid to the plan.
    (iv) In addition to the correction amount in subparagraph (1), if 
the plan was not receiving rent at FMV, as determined by a qualified, 
independent appraiser, the Principal Amount also includes the 
difference between the rent actually paid and the rent that should have 
been paid at FMV. The plan sponsor or an affiliate of the plan sponsor 
must pay to the plan this additional Principal Amount, plus the greater 
of (A) Lost Earnings or (B) Restoration of Profits resulting from the 
plan sponsor's or affiliate's use of the Principal Amount, as described 
in section 5(b).
    (v) The principles of paragraph (c)(2) of this section are 
illustrated in the following example:
    Example. The plan purchased at FMV from the plan sponsor an office 
building that served as the sponsor's primary business site. 
Simultaneously, the plan sponsor leased the building from the plan at 
below the market rental rate. The Plan Official obtains from a 
qualified, independent appraiser an appraisal of the property 
reflecting the FMV of the property and rent. To correct the 
transaction, the plan sponsor purchases the property from the plan at 
the higher of the appraised value at the time of the resale or the 
original sales price and also pays the Lost Earnings. Because the rent 
paid to the plan was below the market rate, the sponsor must also make 
up the difference between the rent paid under the terms of the lease 
and the amount that should have been paid, plus Lost Earnings on this 
amount, as described in section 5(b).
    (3) Documentation. In addition to the documentation required by 
section 6.1, submit the following documents:
    (i) Documentation of the plan's purchase of the real property, 
including the date of the purchase, the plan's purchase price, and the 
identity of the original seller;
    (ii) Documentation of the plan's sale of the asset, including the 
date of sale, the sales price, and the identity of the purchaser;
    (iii) A narrative describing the relationship of the original 
seller to the plan and the relationship of the purchaser to the plan;
    (iv) A copy of the lease;
    (v) Documentation of the date and amount of each lease payment 
received by the plan; and
    (vi) The qualified, independent appraiser's report addressing both 
the FMV of the property at the time of the original sale and at the 
Recovery Date, and the FMV of the lease payments.
(d) Purchase of an Asset (Including Real Property) by a Plan From a 
Person Who Is Not a Party in Interest With Respect to the Plan at a 
Price More Than Fair Market Value
    (1) Description of Transaction. A plan acquired an asset from a 
person who is not a party in interest with respect to the plan, without 
determining the asset's FMV. As a result, the plan paid more than it 
should have for the asset.
    (2) Correction of Transaction. The Principal Amount is the 
difference between the actual purchase price and the asset's FMV at the 
time of purchase. The plan must receive the Principal Amount plus the 
Lost Earnings, as described in section 5(b).
    (i) The principles of paragraph (d)(2) of this section are 
illustrated in the following example:
    Example. A plan bought unimproved land without obtaining a 
qualified, independent appraisal. Upon discovering that the purchase 
price was $10,000 more than the appraised FMV, the Plan Official pays 
the plan the Principal Amount of $10,000, plus Lost Earnings as 
described in section 5(b).
    (3) Documentation. In addition to the documentation required by 
section 6.1, submit the following documents:
    (i) Documentation of the plan's original purchase of the asset, 
including the date of the purchase, the purchase price, and the 
identity of the seller;
    (ii) A narrative describing the relationship of the seller to the 
plan; and
    (iii) A copy of the qualified, independent appraiser's report 
addressing the value at the time of the plan's purchase.
(e) Sale of an Asset (Including Real Property) by a Plan to a Person 
Who Is Not a Party in Interest With Respect to the Plan at a Price Less 
Than Fair Market Value
    (1) Description of Transaction. A plan sold an asset to a person 
who is not a party in interest with respect to the plan, without 
determining the asset's FMV. As a result, the plan received less than 
it should have from the sale.
    (2) Correction of Transaction. The Principal Amount is the amount 
by which the FMV of the asset as of the Recovery Date exceeds the price 
at which the plan sold the property. The plan must receive the 
Principal Amount plus Lost Earnings as described in section 5(b).
    (i) The principles of paragraph (e)(2) of this section are 
illustrated in the following example:
    Example. A plan sold unimproved land without taking steps to ensure 
that the plan received FMV. Upon discovering that the sale price was 
$10,000 less than the FMV, the Plan Official pays the plan the 
Principal Amount of $10,000 plus Lost Earnings as described in section 
5(b).
    (3) Documentation. In addition to the documentation required by 
section 6.1, submit the following documents:

[[Page 4224]]

    (i) Documentation of the plan's original sale of the asset, 
including the date of the sale, the sale price, and the identity of the 
buyer;
    (ii) A narrative describing the relationship of the buyer to the 
plan; and
    (iii) A copy of the qualified, independent appraiser's report 
addressing the value at the time of the plan's sale.
(f) Holding of an Illiquid Asset Previously Purchased by a Plan
    (1) Description of Transaction. A plan is holding an asset 
previously purchased from (i) a party in interest with respect to the 
plan in an acquisition for which relief was available under a statutory 
or administrative prohibited transaction exemption, (ii) a party in 
interest with respect to the plan at no greater than FMV at that time 
in an acquisition to which no prohibited transaction exemption applied, 
(iii) a person who was not a party in interest with respect to the plan 
in an acquisition in which a plan fiduciary failed to appropriately 
discharge their fiduciary duties, or (iv) a person who was not a party 
in interest with respect to the plan in an acquisition in which a plan 
fiduciary appropriately discharged their fiduciary duties. Currently, a 
plan fiduciary determines that such asset is an illiquid asset because: 
(A) the asset failed to appreciate, failed to provide a reasonable rate 
of return, or caused a loss to the plan; (B) the sale of the asset is 
in the best interest of the plan; and (C) following reasonable efforts 
to sell the asset to a person who is not a party in interest with 
respect to the plan, the asset cannot immediately be sold for its 
original purchase price, or its current FMV, if greater. Examples of 
assets that may meet this definition include, but are not limited to, 
restricted and thinly traded stock, limited partnership interests, real 
estate and collectibles. In the case of an illiquid asset that is a 
parcel of real estate, no party in interest may own real estate that is 
contiguous to the plan's parcel of real estate on the Recovery Date.
    (2) Correction of Transaction. (i) The transaction may be corrected 
by the sale of the asset to a party in interest, provided the plan 
receives the higher of (A) the FMV of the asset at the time of resale, 
without a reduction for the costs of sale; or (B) the Principal Amount, 
plus Lost Earnings as described in section 5(b). The Plan Official may 
cause the plan to sell the asset to a party in interest. This 
correction provides relief for both the original purchase of the asset, 
if required, and the sale of the illiquid asset by the plan to a party 
in interest; relief from the prohibited transaction excise tax also is 
provided if the Plan Official satisfies the applicable conditions of 
the VFC Program class exemption.
    (ii) For this transaction, the Principal Amount is (A) the amount 
that would have been available had the Breach not occurred, or (B) the 
plan's original purchase price if the original purchase was not a 
prohibited transaction or imprudent.
    (iii) The principles of paragraph (f)(2) of this section are 
illustrated in the following examples:
    Example 1. A plan purchases undeveloped real property from a party 
in interest with respect to the plan for $60,000 in June 1999. In April 
2004, Plan Officials determine that the property is an illiquid asset. 
A qualified, independent appraiser appraises the property at a current 
FMV of $20,000. The plan sponsor pays the plan the Principal Amount of 
$60,000 plus Lost Earnings as described in section 5(b), and Plan 
Officials transfer the property from the plan to the plan sponsor. The 
Plan Officials also comply with the applicable terms of the related 
exemption.
    Example 2. A plan purchases a limited partnership interest for 
$60,000 in June 1999 from an unrelated party after plan fiduciaries 
properly fulfill their fiduciary duties with respect to the purchase. 
In April 2004, Plan Officials determine that the interest is an 
illiquid asset because the interest has failed to generate a reasonable 
rate of return. A qualified, independent appraiser appraises the 
interest at a current FMV of $80,000. The plan sponsor pays the plan 
the FMV of $80,000 without a reduction for the costs of the sale, which 
is greater than the Principal Amount plus Lost Earnings, and Plan 
Officials transfer the interest from the plan to the plan sponsor. The 
Plan Officials also comply with the applicable terms of the related 
exemption.
    (3) Documentation. In addition to the documentation required by 
section 6.1, submit the following documents:
    (i) Documentation of the plan's original purchase of the asset, 
including the date of the purchase, the plan's purchase price, the 
identity of the original seller, and a description of the relationship, 
if any, between the original seller and the plan;
    (ii) The qualified, independent appraiser's report addressing the 
FMV of the asset purchased by the plan at the recovery date;
    (iii) A narrative describing the plan's efforts to sell the asset 
to persons who are not parties in interest with respect to the plan and 
any documentation of such efforts to sell the asset;
    (iv) A statement from a Plan Official attesting that: (A) the asset 
failed to appreciate, failed to provide a reasonable rate of return, or 
caused a loss to the plan; (B) the sale of the asset is in the best 
interest of the plan; (C) the asset is an illiquid asset; and (D) the 
plan made reasonable efforts to sell the asset to persons who are not 
parties in interest with respect to the plan without success; and
    (v) In the case of an illiquid asset that is a parcel of real 
estate, a statement from a Plan Official attesting that no party in 
interest owns real estate that is contiguous to the plan's parcel of 
real estate on the Recovery Date.

7.5 Benefits

(a) Payment of Benefits Without Properly Valuing Plan Assets on Which 
Payment Is Based
    (1) Description of Transaction. A defined contribution pension plan 
pays benefits based on the value of the plan's assets. If one or more 
of the plan's assets are not valued at current value, the benefit 
payments are not correct. If the plan's assets are overvalued, the 
current benefit payments will be too high. If the plan's assets are 
undervalued, the current benefit payments will be too low.
    (2) Correction of Transaction. (i) Establish the correct value of 
the improperly valued asset for each plan year, starting with the first 
plan year in which the asset was improperly valued. In the case of 
undervalued plan assets, restore to the plan for distribution to the 
affected plan participants, or restore directly to the plan 
participants, the amount by which all affected participants were 
underpaid distributions to which they were entitled under the terms of 
the plan, plus Lost Earnings as described in section 5(b) on the 
underpaid distributions. In the case of overvalued plan assets, restore 
to the plan the amount which exceeded the paid distribution amount to 
which all affected participants were entitled under the terms of the 
plan, plus Lost Earnings as described in section 5(b) on the overpaid 
distributions. File amended Annual Report Forms 5500, as detailed 
below.
    (ii) To correct the valuation defect, a Plan Official must 
determine the FMV of the improperly valued asset per section 5(a) for 
each year in which the asset was valued improperly.
    (iii) Once the FMV has been determined, the participant account

[[Page 4225]]

balances for each year must be adjusted accordingly.
    (iv) The Annual Report Forms 5500 must be amended and refiled for 
(A) the last three plan years or (B) all plan years in which the value 
of the asset was reported improperly, whichever is less.
    (v) The Plan Official or plan administrator must determine who 
received distributions from the plan during the time the asset was 
valued improperly. For distributions that were too low, the amount of 
the underpayment is treated as a Principal Amount for each individual 
who received a distribution. The Principal Amount and Lost Earnings 
must be paid to the affected individuals. For distributions that were 
too high, the total of the overpayments constitutes the Principal 
Amount for the plan. The Principal Amount plus the Lost Earnings, as 
described in section 5(b), must be restored to the plan or to any 
participants who received distributions that were too low.
    (vi) The principles of paragraph (a)(2) of this section are 
illustrated in the following examples:
    Example 1. On December 31, 1995, a profit-sharing plan purchased a 
20-acre parcel of real property for $500,000, which represented a 
portion of the plan's assets. The plan has carried the property on its 
books at cost, rather than at FMV. One participant left the company on 
January 1, 1997, and received a distribution, which included the 
participant's portion of the value of the property. The separated 
participant's account balance represented 2% of the plan's assets. As 
part of the correction for the VFC Program, a qualified, independent 
appraiser has determined the FMV of the property for 1996, 1997, and 
1998. The FMV as of December 31, 1996, was $400,000. Therefore, this 
participant was overpaid by $2,000 (($500,000-$400,000) multiplied by 
2%). The Plan Officials corrected the transaction by paying to the plan 
the $2,000 Principal Amount plus Lost Earnings as described in section 
5(b).
    The plan administrator also filed an amended Form 5500 for plan 
years 1996 and 1997, to reflect the proper values. The plan 
administrator will include the correct asset valuation in the 1998 Form 
5500 when that form is filed.
    Example 2. Assume the same facts as in Example 1, except that the 
property had appreciated in value to $600,000 as of December 31, 1996. 
The separated participant would have been underpaid by $2,000. The 
correction consists of locating the participant and distributing to the 
participant the $2,000 Principal Amount plus Lost Earnings as described 
in section 5(b), as well as filing the amended Forms 5500.
    (3) Documentation. In addition to the documentation required by 
section 6.1, submit the following documents:
    (i) A copy of the qualified, independent appraiser's report for 
each plan year in which the asset was revalued;
    (ii) A written statement confirming the date that amended Annual 
Report Forms 5500 with correct valuation data were filed;
    (iii) If losses are restored to the plan, proof of payment to the 
plan and copies of the adjusted participant account balances; and
    (iv) If supplemental distributions are made, proof of payment to 
the individuals entitled to receive the supplemental distributions or 
to the plan if paid pursuant to the de minimis exception in section 
5(e).

7.6 Plan Expenses

(a) Duplicative, Excessive, or Unnecessary Compensation Paid by a Plan
    (1) Description of Transaction. A plan used plan assets to pay 
compensation, including commissions or fees, to a service provider 
(such as an attorney, accountant, recordkeeper, actuary, financial 
adviser, or insurance agent), and the compensation was:
    (i) excessive in amount for the services provided to the plan;
    (ii) duplicative, in that a plan paid two or more providers for the 
same service; or
    (iii) unnecessary for the operation of the plan, in that the 
services were not helpful and appropriate in carrying out the purposes 
for which the plan is maintained.
    (2) Correction of Transaction. (i) Restore to the plan the 
Principal Amount, plus the greater of (A) Lost Earnings or (B) 
Restoration of Profits resulting from the use of the Principal Amount, 
as described in section 5(b).
    (ii) (A) For the transactions described in paragraph (a)(1)(i) 
above, the Principal Amount is the difference between (1) the amount of 
compensation paid by the plan to the service provider and (2) the 
reasonable market value of such services.
    (B) For the transactions described in paragraph (a)(1)(ii) above, 
the Principal Amount is the difference between (1) the total amount of 
compensation paid to the service providers and (2) the least amount of 
compensation paid to one of the service providers for the duplicative 
services.
    (C) For the transactions described in paragraph (a)(1)(iii) above, 
the Principal Amount is the amount of compensation paid by the plan to 
the service provider for the unnecessary services.
    (iii) The principles of paragraph (a)(2) of this section are 
illustrated in the following examples:
    Example 1. Excessive compensation. A plan hired an investment 
adviser who advised the plan's trustees about how to invest the plan's 
entire portfolio. In accordance with the plan document, the trustees 
instructed the adviser to limit the plan's investments to equities and 
bonds. In exchange for the services, the plan paid the investment 
adviser 3% of the value of the portfolio's assets. If the trustees had 
inquired, they would have learned that comparable investment advisers 
charged 1% of the value of the assets for the type of portfolio that 
the plan maintained. To correct the transaction, the plan must be paid 
the Principal Amount of 2% of the value of the plan's assets, plus the 
higher Lost Earnings or Restoration of Profits, as described in section 
5(b).
    Example 2. Unnecessary Compensation. A plan paid a travel agent to 
arrange a fishing trip for the plan's investment adviser as a way of 
rewarding the adviser because the plan's investment return for the year 
exceeded the plan's investment goals by 10%. An internal auditor 
discovered the charge on the plan's record books. To correct the 
transaction, the plan must be paid the Principal Amount, which is the 
total amount paid to the travel agent, plus the higher of Lost Earnings 
or Restoration of Profits as described in section 5(b).
    (3) Documentation. In addition to the documentation required by 
section 6.1, submit the following documents:
    (i) For the transactions described in paragraph (a)(1)(i) above, a 
written estimate of the reasonable market value of the services and the 
estimator's qualifications; and
    (ii) The cost of the services at issue during the period that such 
services were provided to the plan.
(b) Expenses Improperly Paid by a Plan
    (1) Description of Transaction. A plan used plan assets to pay 
expenses, including commissions or fees, which should have been paid by 
the plan sponsor, to a service provider (such as an attorney, 
accountant, recordkeeper, actuary, financial adviser, or insurance 
agent) for:
    (i) services provided in connection with the administration and 
maintenance of the plan (``plan expenses'' \74\) in circumstances where 
a

[[Page 4226]]

plan provision requires that such plan expenses be paid by the plan 
sponsor, or
---------------------------------------------------------------------------

    \74\ See Advisory Opinion 2001-01A (Jan. 18, 2001).
---------------------------------------------------------------------------

    (ii) services provided in connection with the establishment, 
design, or termination of the plan (``settlor expenses'' \75\), which 
relate to the activities of the plan sponsor in its capacity as 
settlor.
---------------------------------------------------------------------------

    \75\ See id.
---------------------------------------------------------------------------

    (2) Correction of Transaction. (i) Restore to the plan the 
Principal Amount, plus the greater of (A) Lost Earnings or (B) 
Restoration of Profits resulting from the use of the Principal Amount, 
as described in section 5(b).
    (ii) The Principal Amount is the entire amount improperly paid by 
the plan to the service provider for expenses that should have been 
paid by the plan sponsor.
    (iii) The principles of paragraph (b)(2) of this section are 
illustrated in the following example:
    Example. Employer X, the plan sponsor of Plan Y, is considering 
amending its defined contribution plan to add a 5% matching 
contribution. Employer X operates in a competitive industry, and a 
human resources consultant has recommended, among other improvements, 
that Employer X provide a competitive matching contribution to help 
attract and retain a highly qualified workforce. Employer X hired an 
actuary to estimate the cost of providing this matching contribution 
over the next ten years. In exchange for these services, the plan paid 
the actuary $10,000. Several months after the actuary's bill has been 
paid, a Plan Official realizes that one of Employer X's employees 
erroneously paid the bill from the defined contribution plan's assets. 
The bill should have been paid by Employer X because the bill related 
to settlor expenses incurred by Employer X in analyzing whether to add 
a matching contribution to the plan. To correct the transaction, the 
plan must be paid the Principal Amount ($10,000), plus Lost Earnings or 
Restoration of Profits, as described in section 5(b).
    (3) Documentation. In addition to the documentation required by 
section 6.1, submit copies of the plan's accounting records which show 
the date and amount of expenses paid by the plan to the service 
provider.
(c) Payment of Dual Compensation to a Plan Fiduciary
    (1) Description of Transaction. A plan used plan assets to pay 
compensation to a fiduciary for services rendered to the plan when the 
fiduciary already receives full-time pay from an employer or an 
association of employers, whose employees are participants in the plan, 
or from an employee organization whose members are participants in the 
plan. The plan's payments to the plan fiduciary are not reimbursements 
of expenses properly and actually incurred by the fiduciary in the 
performance of their fiduciary duties.
    (2) Correction of Transaction. (i) Restore to the plan the 
Principal Amount, plus the greater of (A) Lost Earnings or (B) 
Restoration of Profits resulting from the fiduciary's use of the 
Principal Amount, as described in section 5(b).
    (ii) The Principal Amount is the amount of compensation paid to the 
fiduciary by the plan.
    (iii) The principles of paragraph (c)(2) of this section are 
illustrated in the following example:
    Example. A union sponsored a health plan funded through 
contributions by employers. The union president receives $50,000 per 
year from the union in compensation for services as union president. 
The president is appointed as a trustee of the health plan while 
retaining the position as union president. In exchange for acting as 
plan trustee, the union president is paid a salary of $200 per week by 
the plan while still receiving the $50,000 salary from the union. Since 
$50,000 is full-time pay, the plan's weekly salary payments are 
improper. To correct the transaction, the plan must be paid the 
Principal Amount, which is the $200 weekly salary amount for each week 
that the salary was paid, plus the higher of Lost Earnings or 
Restoration of Profits, as described in section 5(b).
    (3) Documentation. In addition to the documentation required by 
section 6.1, submit copies of the plan's accounting records which show 
the date and amount of compensation paid by the plan to the identified 
fiduciary.

Appendix A--Sample VFC Program No Action Letter

Applicant (Plan Official)
Address
Dear Applicant (Plan Official):
    Re: VFC Program Application No. xx-xxxxxx

    The Department of Labor, Employee Benefits Security 
Administration (EBSA), administers and enforces Title I of the 
Employee Retirement Income Security Act of 1974 (ERISA). EBSA 
established a Voluntary Fiduciary Correction (VFC) Program to 
encourage the voluntary correction of breaches of fiduciary 
responsibility and the restoration of losses to the plan 
participants and beneficiaries.
    You submitted a VFC Program application identifying the 
following transactions as breaches, or potential breaches, of the 
fiduciary duty provisions in Part 4 of Title I of ERISA. You also 
submitted documentation to EBSA under the VFC Program on the 
corrective action you have taken. Your application was assigned the 
application number indicated above.
    [Briefly recap the transaction and correction. Example: Failure 
to deposit participant contributions to the XYZ Corp. 401(k) plan 
within the time frames required by ERISA from (date) to (date). All 
participant contributions were deposited by (date) and Lost Earnings 
on the delinquent contributions were deposited and allocated to 
participants' plan accounts on (date).]
    Based on your representations and the corrective actions taken, 
in accordance with the terms and limitations set forth in the VFC 
Program, EBSA will not recommend that the Solicitor of Labor 
initiate legal action against you, and EBSA will not seek to impose 
civil penalties under section 502(l) or section 502(i) of ERISA with 
respect to the transactions described above.
    EBSA's decision is conditioned on the representations in your 
VFC Program application being complete and accurate. The decision 
does not preclude EBSA from conducting an investigation of any 
potential violations of criminal law in connection with the 
transaction identified in the application or seeking appropriate 
relief from any other person. EBSA's decision is binding on EBSA 
only, and does not bar other governmental agencies, plan 
fiduciaries, participants or beneficiaries, and other interested 
persons from seeking separate or additional remedies.
    [If the transaction is a prohibited transaction for which no 
exemptive relief is available, add the following language: The 
Secretary of Labor is required by section 3003(c) of ERISA, 29 
U.S.C. 1203(c), to transmit to the Secretary of the Treasury 
information indicating that a prohibited transaction has occurred. 
Accordingly, this matter will be referred to the Internal Revenue 
Service.]
    If you have any questions about this letter, you may contact the 
Regional VFC Program Coordinator at (insert applicable address and 
telephone number).

Appendix B--VFC Program Application Checklist (Required)

    Use this checklist to make sure you are submitting a complete 
application. Indicate ``Yes'', ``No'' or ``N/A'' next to each item. 
A ``No'' answer or the failure to include a completed checklist will 
delay review of the application until all required items are 
received. The applicant must sign and date the checklist and include 
it with the application. Check with the relevant Regional Office 
whether it accepts email submissions of VFC Program applications.

__1. Have you reviewed the eligibility, definitions, transaction and 
correction, and documentation sections of the VFC Program?
__2. Have you included the name, address (street or email) and 
telephone number of a contact person familiar with the contents of 
the application?
__3. Have you provided the EIN, Plan Number, and address (street and 
email) of the plan sponsor and plan administrator?
__4. Have you provided the date that the most recent Form 5500 was 
filed by the plan

[[Page 4227]]

(or for a bulk application as described in section 4(d), the nine-
digit employer identification number for each plan sponsor of a 
named plan)?
__5. Have you enclosed a signed and dated certification under 
penalty of perjury for the plan fiduciary with knowledge of the 
transactions and for each applicant and the applicant's 
representative, if any? In the case of a bulk application, have you 
enclosed a signed and dated certification under penalty of perjury 
for the bulk applicant based on knowledge of the transactions and 
for the bulk applicant's representative, if any? In the case of a 
contributing or adopting employer in a multiemployer plan or 
multiple employer plan, the employer may sign the Penalty of Perjury 
statement and, without regard to the employer's status as a plan 
fiduciary, no other plan fiduciary need sign.
__6. Have you enclosed relevant portions of the plan document and 
any other pertinent documents (such as the adoption agreement, trust 
agreement, or insurance contract) with the relevant sections 
identified?
__7. If applicable, have you provided written notification to EBSA 
of any current investigation or examination of the plan, or of the 
applicant or plan sponsor in connection with an act or transaction 
directly related to the plan by the PBGC, any state attorney 
general, or any state insurance commissioner?
__8. If applicable (under section 4(b)(2) of the Program), have you 
included the following items?
__a. Contact information for the law enforcement agency notified of 
the criminal activity;
__b. A statement from the applicant asserting no involvement in the 
potential criminal activity; and
__c. A statement as to whether a claim relating to the criminal 
activity has been made under an ERISA section 412 fidelity bond.
__9. Where applicable, have you enclosed a copy of an appraiser's 
report?
__10. Where applicable, have you enclosed a copy of an independent 
fiduciary's approval?
__11. Have you enclosed supporting documentation, including:
__a. A detailed narrative of the Breach, including the date it 
occurred;
__b. Documentation that supports the narrative description of the 
transaction;
__c. An explanation of how the Breach was corrected, by whom and 
when, with supporting documentation;
__d. A list of all persons materially involved in the Breach and its 
correction (e.g., fiduciaries, service providers, borrowers, 
lenders);
__e. Specific calculations demonstrating how Principal Amount and 
Lost Earnings or Restoration of Profits were computed, or, if the 
Online Calculator was used, a copy of the ``Print Viewable Results'' 
page(s) after completing use of the Online Calculator;
__f. Proof of payment of principal amount;
__g. Proof of payment of Lost Earnings or restoration of profits to 
the plan; and

    Caution: The correction amount and the costs of correction 
cannot be paid from plan assets, including by charges against 
participant accounts or plan forfeiture accounts.

__h. If application concerns delinquent participant contributions or 
loan repayments, a statement from a Plan Official identifying the 
earliest date on which participant contributions/loan repayments 
reasonably could have been segregated from the employer's general 
assets and supporting documentation on which the Plan Official 
relied?
__12. If you are an eligible applicant and wish to avail yourself of 
excise tax relief under the VFC Program Class Exemption:
__a. Have you made proper arrangements to provide within 60 calendar 
days after submission of this application a copy of the VFC Program 
Class Exemption notice to all interested persons and to the EBSA 
Regional Office to which the application is filed; or
__b. If you are relying on the exception to the notice requirement 
in section IV.C. of the VFC Program Class Exemption because the 
amount of the excise tax otherwise due would be less than or equal 
to $100.00, have you provided to the appropriate EBSA Regional 
Office a copy of a completed IRS Form 5330 or other written 
documentation containing the information required by IRS Form 5330 
and proof of payment?
__13. In calculating Lost Earnings, have you elected to use:
__a. The Online Calculator; or
__b. A manual calculation performed in accordance with section 5(b) 
of the VFC Program?
__14. If the application involves payments to participants and 
beneficiaries:
__a. Have you enclosed a description demonstrating proof of payment 
to participants and beneficiaries whose current location is known to 
the plan and/or applicant in accordance with section 5(d) of the VFC 
Program?
__b. For individuals who need to be located, have you demonstrated 
how adequate funds have been segregated to pay missing individuals 
and included a description of the process that you commenced to 
locate missing individuals in accordance with section 5(d)?
__15. For purposes of the three transactions involving participant 
contributions covered under section 7.1, has the plan implemented 
measures to ensure that such transactions do not recur?

Signature of Applicant and Date Signed:
-----------------------------------------------------------------------

Name of Applicant:
-----------------------------------------------------------------------

Title/Relationship to the Plan:
-----------------------------------------------------------------------

Name of Plan, EIN and Plan Number:
-----------------------------------------------------------------------
-----------------------------------------------------------------------

Contact information: Phone; email:
-----------------------------------------------------------------------

Paperwork Reduction Act Notice

    The information identified on this form is required for a valid 
application for the Voluntary Fiduciary Correction Program of the 
U.S. Department of Labor's Employee Benefits Security Administration 
(EBSA). You must complete this form and submit it as part of the 
application in order to receive the relief offered under the Program 
with respect to a breach of fiduciary responsibility under Part 4 of 
Title I of ERISA. EBSA will use this information to determine that 
you have satisfied the requirements of the Program. EBSA estimates 
that completing and submitting this form will require an average of 
2 to 4 minutes. This collection of information is currently approved 
under OMB Control Number 1210-0118. You are not required to respond 
to a collection of information unless it displays a currently valid 
OMB Control Number.

Appendix C--EBSA Regional Offices

    Submit your VFC Program application to the appropriate EBSA 
Regional Office. Verify current telephone numbers and addresses on 
EBSA's website, www.dol.gov/ebsa/ before you submit your 
application. Check with the relevant Regional Office on whether it 
accepts email submissions of VFC Program applications.
    Atlanta Regional Office, 61 Forsyth Street SW, Suite 7B54, 
Atlanta, GA 30303, telephone (404) 302-3900, fax (404) 302-3975; 
jurisdiction: Alabama, Florida, Georgia, Mississippi, North 
Carolina, South Carolina, Tennessee, Puerto Rico.
    Boston Regional Office, J.F.K. Federal Building, 15 New Sudbury 
Street, Room 575, Boston, MA 02203, telephone (617) 565-9600, fax: 
(617) 565-9666; jurisdiction: Connecticut, Maine, Massachusetts, New 
Hampshire, central and western New York, Rhode Island, Vermont.
    Chicago Regional Office, John C. Kluczynski Federal Building, 
230 South Dearborn Street, Suite 2160, Chicago, IL 60604, telephone 
(312) 353-0900, fax (312) 353-1023; jurisdiction: northern Illinois, 
northern Indiana, Wisconsin.
    Cincinnati Regional Office, 1885 Dixie Highway, Suite 210, Ft. 
Wright, KY 41011-2664, telephone (859) 578-4680, fax (859) 578-4688; 
jurisdiction: southern Indiana, Kentucky, Michigan, Ohio.
    Dallas Regional Office, 525 South Griffin Street, Rm. 900, 
Dallas, TX 75202-5025, telephone (972) 850-4500, fax (214) 767-1055; 
jurisdiction: Arkansas, Louisiana, New Mexico, Oklahoma, Texas.
    Kansas City Regional Office, 2300 Main Street, Suite 1100, 
Kansas City, MO 64108, telephone (816) 285-1800, fax (816) 285-1888; 
jurisdiction: Colorado, southern Illinois, Iowa, Kansas, Minnesota, 
Missouri, Montana, Nebraska, North Dakota, South Dakota, Wyoming.
    Los Angeles Regional Office, 35 N Lake Ave., Suite 300, 
Pasadena, CA 91101, telephone (626) 229-1000, fax (626) 229-1098; 
jurisdiction: 10 southern counties of California, Arizona, Hawaii, 
American Samoa, Guam, Wake Island.
    New York Regional Office, 201 Varick Street, Room 746, New York, 
NY 10014, telephone (212) 607-8600, fax (212) 607-8611; 
jurisdiction: southeastern New York, northern New Jersey.
    Philadelphia Regional Office, 1835 Market Street, 21st Floor, 
Mailstop EBSA/21, Philadelphia, PA 19103, telephone (215) 861-5300, 
fax (215) 861-5347; jurisdiction: Delaware, Maryland, southern New 
Jersey,

[[Page 4228]]

Pennsylvania, Virginia, Washington, DC, West Virginia.
    San Francisco Regional Office, 90 7th Street, Suite 11-300, San 
Francisco, CA 94103, telephone (415) 625-2481, fax (415) 625-2450; 
jurisdiction: Alaska, 48 northern counties of California, Idaho, 
Nevada, Oregon, Utah, Washington.

Appendix D--Lost Earnings Example (Manual Calculation)

Delinquent Participant Contributions

    Company A pays its employees every other Friday. Each pay date, 
participant contributions total $10,000, which reasonably can be 
segregated from Company A's general assets by ten business days 
following each pay date. Company A should have remitted participant 
contributions for the pay date ending March 2, 2001 to the plan by 
March 16, 2001, the Loss Date, but actually remitted them on April 
13, 2001, the Recovery Date. In early 2004, a Plan Official 
discovers that participant contributions for this pay period were 
not remitted on a timely basis. To comply with the Program, the Plan 
Official decided to repay all Lost Earnings on January 30, 2004.
    Based on the above facts:

 Principal Amount is $10,000
 Loss Date is March 16, 2001
 Recovery Date is April 13, 2001
 Number of Days Late is 28 (Recovery Date less Loss Date)

    The basic formula for computing earnings using the applicable 
factors under IRS Revenue Procedure 95-17 is: Dollar Amount * IRS 
factor.
    Step 1. The Plan Official must calculate Lost Earnings, based on 
the Principal Amount, that should have been paid on the Recovery 
Date.
    The first period of time is from March 16, 2001 to March 31, 
2001 (15 days). The Code underpayment rate is 9%. Using Revenue 
Procedure 95-17, the factor for 15 days at 9% is 0.003705021 from 
table 23.

$10,000 * 0.003705021 = $37.05

    The plan is due $10,037.05 as of March 31, 2001. The second 
period of time is April 1, 2001 through April 13, 2001 (13 days). 
The Code underpayment rate is 8%. Using Revenue Procedure 95-17, the 
factor for 13 days at 8% is 0.002853065 from table 21.

$10,037.05 * 0.002853065 = $28.64

    Therefore, Lost Earnings of $65.69 ($37.05 plus $28.64) must be 
paid to the plan.
    Step 2. If Lost Earnings are paid to the plan after the Recovery 
Date, the Plan Official must calculate the amount of interest on the 
Lost Earnings (determined in Step 1) that must also be paid to the 
plan. This calculation is shown by the following chart: (The 
``Interest'' column is the previous time period's ``Amnt. Due'' 
multiplied by the Factor. ``Amnt. Due'' is the previous ``Amnt. 
Due'' plus ``Interest''. The calculation in the first row is based 
on the $65.69 Lost Earnings.)

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                 Underpmnt.   Rev. proc.
                        1st day                              To         Days      rate (%)      table         Factor         Interest        Amnt. due
--------------------------------------------------------------------------------------------------------------------------------------------------------
4/14/01...............................................      6/30/01         78            8           21      .017240956        1.132558        66.82256
7/1/01................................................      9/30/01         92            7           19      .017798686        1.189354        68.01191
10/1/01...............................................     12/31/01         92            7           19      .017798686        1.210523        69.22243
1/1/02................................................      3/31/02         90            6           17      .014903267        1.031640        70.25408
4/1/02................................................      6/30/02         91            6           17      .015070101        1.058736        71.31281
7/1/02................................................      9/30/02         92            6           17      .015236961        1.086591        72.39940
10/1/02...............................................     12/31/02         92            6           17      .015236961        1.103147        73.50255
1/1/03................................................      3/31/02         90            5           15      .012404225        0.911742        74.41429
4/1/03................................................      6/30/03         91            5           15      .012542910        0.933372        75.34766
7/1/03................................................      9/30/03         92            5           15      .012681615        0.955530        76.30319
10/1/03...............................................     12/31/03         92            4           13      .010132630        0.773152        77.07634
1/1/04................................................      1/30/04         30            4           61      .003283890        0.253110        77.32945
--------------------------------------------------------------------------------------------------------------------------------------------------------
    Total Interest......................................................................................................           11.64  ..............
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Note that the last factor comes from the Revenue Procedure 95-17 
tables for leap years. The plan is also owed $11.64. This is the 
amount of interest on $65.69 (Lost Earnings on the Principal Amount) 
accrued between April 13, 2001, the Recovery Date, when the 
Principal Amount $10,000 was paid to the plan, and January 30, 2004, 
the date chosen to repay Lost Earnings.
    Therefore, the Plan Official must pay $77.33 to the plan on 
January 30, 2004, as Lost Earnings ($65.69) plus interest on Lost 
Earnings ($11.64) for the pay period ending March 2, 2001, in 
addition to the Principal Amount ($10,000) that was paid on April 
13, 2001. This total corresponds with the final Total Due in the 
above chart (emphasized).

Appendix E--Model Application Form (Optional)

Voluntary Fiduciary Correction Program Application Form

    This application form provides a recommended format for your VFC 
Program application. Please make sure you have attached all 
documents identified on the VFC Program Checklist (for example, 
proof of payment). If you choose to use a different format to submit 
the required information for your VFC Program Application, your 
application must still include a completed copy of the VFC Program 
Checklist. Submit your application to the appropriate EBSA Regional 
Office. Check with the relevant Regional Office whether it accepts 
email submissions of VFC Program applications. For full application 
procedures, consult www.dol.gov/ebsa/.

Applicant Name(s) and Address(es) (street and email)
List separately:
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------

List Transaction(s) Corrected

    Check which transaction(s) listed in the VFC Program you have 
corrected:

__Delinquent Participant Contributions and Loan Repayments to 
Pension Plans
__Delinquent Participant Contributions to Insured Welfare Plans
__Delinquent Participant Contributions to Welfare Plan Trusts
__Loan at Fair Market Interest Rate to a Party in Interest
__Loan at Below-Market Interest Rate to a Party in Interest
__Loan at Below-Market Interest Rate to a Non-Party in Interest
__Loan at Below-Market Interest Rate Due to Delay in Perfecting 
Plan's Security Interest
__Loans Failing to Comply with Plan Provisions for Amount, Duration 
or Level Amortization
__Default Loans
__Purchase of an Asset by a Plan from a Party in Interest
__Sale of an Asset by a Plan to a Party in Interest
__Sale and Leaseback of Real Property to Employer
__Purchase of Asset by a Plan from a Non-Party in Interest at More 
Than Fair Market Value
__Sale of an Asset by a Plan to a Non-Party in Interest at Less Than 
Fair Market Value
__Holding of an Illiquid Asset Previously Purchased by a Plan
__Payment of Benefits Without Properly Valuing Plan Assets on Which 
Payment is Based
__Duplicative, Excessive, or Unnecessary Compensation Paid by a Plan
__Expenses Improperly Paid by a Plan
__Payment of Dual Compensation to a Plan Fiduciary

Correction Amount

Principal Amount: $ ______

[[Page 4229]]

Date Paid _/_/_
Lost Earnings/Restoration of Profit: $ ______
Date Paid _/_/_

Narrative and Calculations

    List:
    (1) All persons materially involved in the Breach and its 
correction (e.g., fiduciaries, service providers):
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------

    (2) An explanation of the Breach, including the date(s) it 
occurred (attach separate sheets if necessary):
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------

    (3) An explanation of how the Breach was corrected, by whom, and 
when (attach separate sheets if necessary):
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------

    (4) For a correction of Delinquent Participant Contributions or 
Loan Repayments, provide a statement from a Plan Official 
identifying the earliest date on which participant contributions/
loan repayments reasonably could have been segregated from the 
employer's general assets (attach supporting documentation on which 
Plan Official relied).
    Number of days used to determine the date on which participant 
contributions/loan repayments withheld from employees' pay could 
reasonably have been segregated from the employer's general assets:
-----------------------------------------------------------------------
-----------------------------------------------------------------------

    Description of how this date was determined, including the 
applicant's current contribution and/or repayment remittance 
practices:
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------

    (5) For a correction of Delinquent Participant Contributions or 
Loan Repayments, provide a narrative describing any changes to the 
applicant's contribution and/or repayment remittance practices after 
the period of unpaid or late contributions and/or repayments, 
including any steps taken to prevent future delinquencies: (attach 
separate sheets if necessary)
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------

    (6) Specific calculations demonstrating how Principal Amount and 
Lost Earnings or Restoration of Profits were calculated (attach 
separate sheets if necessary): If the Online Calculator was used, 
you only need to indicate this and attach a copy of the ``View 
Printable Results'' page.
    __Online Calculator--``View Printable Results'' page attached.
    __Manual calculation--see attached calculations, which must 
follow the method used in subparagraphs (i) through (iv) of section 
5(b)(6). See Appendix D for a sample.

Supplemental Information

    (1) Plan Sponsor Name:
-----------------------------------------------------------------------
EIN:-------------------------------------------------------------------
Address:---------------------------------------------------------------

    (2)(a) Plan Name:

-----------------------------------------------------------------------
Plan Number:-----------------------------------------------------------

    (2)(b) For Bulk Applicants (attach additional sheets identifying 
this information for each Plan named in the application involved in 
the transaction):
Plan Name:-------------------------------------------------------------
Plan Sponsor EIN or date the most recent Form 5500 was filed: ______

    (3) Plan Administrator Name:
-----------------------------------------------------------------------
EIN:-------------------------------------------------------------------
Address:---------------------------------------------------------------

    (4) Name of Authorized Representative: (Submit written 
authorization signed by the Plan Official.)
-----------------------------------------------------------------------
Address:---------------------------------------------------------------
Telephone:-------------------------------------------------------------

    (5) Name of Contact Person:

-----------------------------------------------------------------------
Address:---------------------------------------------------------------
Telephone:-------------------------------------------------------------
Email:-----------------------------------------------------------------

    (6) Date of Most Recent Annual Report Form 5500 Filing, if 
applicable: _/_/_ for Plan Year Ending: _/_/_
    (7) Is Applicant Seeking Relief From Excise Tax Under PTE 2002-
51?

__Yes--Either:
    __Submit a copy of the notice to interested parties within 60 
calendar days of this application and indicate date of the notice if 
not on the notice itself; or
    __If you are relying on the exception to the notice requirement 
contained in section IV.C. of PTE 2002-51, provide a copy of a 
completed IRS Form 5330 or other written documentation and proof of 
payment.

__No.

    (8) Proof of Payment:

__Canceled check
__Executed wire transfer
__Signed, dated receipt from the recipient of funds transferred to 
the plan (such as a financial institution)
__Bank statements for the plan's account
__Other: ______

    Caution: The correction amount and the costs of correction 
cannot be paid from plan assets, including by charges against 
participant accounts or plan forfeiture accounts.

    (9) Disclosure of a current investigation or examination of the 
plan by an agency, to comply with section 3(b)(3)(v):

__PBGC
__Any state attorney general
__State: ______
__Any state insurance commissioner
__State: ______
__Other federal governmental agency: ______
__Contact person for the agency identified: ______

    (10) Be sure to include the required VFC Program Application 
Checklist and all other documentation identified as being enclosed. 
The checklist is available at http://www.dol.gov/ebsa/calculator/2006vfcpchecklist.html.
    (11) In order to help us improve our service, please indicate 
how you learned about the VFC Program: ______

Authorization of Representative

    I have authorized (insert name of authorized representative) to 
represent me concerning this VFC Program application.

Name of Plan Official
-----------------------------------------------------------------------

Signature of Plan Official
-----------------------------------------------------------------------

Date-------------------------------------------------------------------

Penalty of Perjury Statement

    The following statement must be signed and dated by a plan 
fiduciary, (or pursuant to special rules, a bulk applicant or an 
employer with respect to a multiemployer plan or multiple employer 
plan), with knowledge of the transaction that is the subject of the 
application and by the authorized representative, if any. Each Plan 
Official applying under the VFC Program must also sign and date the 
statement, which must accompany any subsequent additions to the 
application.
    ``Under penalties of perjury I certify that I am not Under 
Investigation (as defined in section 3(b)(3) of the VFC Program) and 
that I have reviewed this application, including all supporting 
documentation, and to the best of my knowledge and belief the 
contents are true, correct, and complete.''
-----------------------------------------------------------------------

Name and Title
Signature--------------------------------------------------------------
Date-------------------------------------------------------------------

Name and Title
Signature--------------------------------------------------------------
Date-------------------------------------------------------------------

Paperwork Reduction Act Notice

    The information identified on this form is required for a valid 
application for the Voluntary Fiduciary Correction Program of the 
U.S. Department of Labor's Employee Benefits Security Administration 
(EBSA). You are not required to use this form; however, you must 
supply the information identified in order to receive the relief 
offered under the Program with respect to a breach of fiduciary 
responsibility under Part 4 of Title I of ERISA. EBSA will use this 
information to determine whether you have satisfied the requirements 
of the Program. EBSA estimates that assembling and submitting this 
information will require an average of 7 hours. This collection of 
information is currently approved under OMB Control Number 1210-
0118. You are not required to respond to a collection of information 
unless it displays a currently valid OMB Control Number.

VFC Program Application Checklist (Required)

    Use this checklist to make sure you are submitting a complete 
application. Indicate ``Yes'', ``No'' or ``N/A'' next to each item. 
A ``No'' answer or the failure to include a completed checklist will 
delay review of the

[[Page 4230]]

application until all required items are received. The applicant 
must sign and date the checklist and include it with the 
application. Check with the relevant Regional Office whether it 
accepts email submissions of VFC Program applications.

__1. Have you reviewed the eligibility, definitions, transaction and 
correction, and documentation sections of the VFC Program?
__2. Have you included the name, address (street or email) and 
telephone number of a contact person familiar with the contents of 
the application?
__3. Have you provided the EIN, Plan Number, and address (street and 
email) of the plan sponsor and plan administrator?
__4. Have you provided the date that the most recent Form 5500 was 
filed by the plan (or for a bulk application as described in section 
4(d), the nine-digit employer identification number for each plan 
sponsor of a named plan)?
__5. Have you enclosed a signed and dated certification under 
penalty of perjury for the plan fiduciary with knowledge of the 
transactions and for each applicant and the applicant's 
representative, if any? In the case of a bulk application, have you 
enclosed a signed and dated certification under penalty of perjury 
for the bulk applicant based on knowledge of the transactions and 
for the bulk applicant's representative, if any? In the case of a 
contributing or adopting employer in a multiemployer plan or 
multiple employer plan, the employer may sign the Penalty of Perjury 
statement and, without regard to the employer's status as a plan 
fiduciary, no other plan fiduciary need sign.
__6. Have you enclosed relevant portions of the plan document and 
any other pertinent documents (such as the adoption agreement, trust 
agreement, or insurance contract) with the relevant sections 
identified?
__7. If applicable, have you provided written notification to EBSA 
of any current investigation or examination of the plan, or of the 
applicant or plan sponsor in connection with an act or transaction 
directly related to the plan by the PBGC, any state attorney 
general, or any state insurance commissioner?
__8. If applicable (under section 4(b)(2) of the Program), have you 
included the following items?
__a. Contact information for the law enforcement agency notified of 
the criminal activity;
__b. A statement from the applicant asserting no involvement in the 
potential criminal activity; and
__c. A statement as to whether a claim relating to the criminal 
activity has been made under an ERISA section 412 fidelity bond.
__9. Where applicable, have you enclosed a copy of an appraiser's 
report?
__10. Where applicable, have you enclosed a copy of an independent 
fiduciary's approval?
__11. Have you enclosed supporting documentation, including:
__a. A detailed narrative of the Breach, including the date it 
occurred;
__b. Documentation that supports the narrative description of the 
transaction;
__c. An explanation of how the Breach was corrected, by whom and 
when, with supporting documentation;
__d. A list of all persons materially involved in the Breach and its 
correction (e.g., fiduciaries, service providers, borrowers, 
lenders);
__e. Specific calculations demonstrating how Principal Amount and 
Lost Earnings or Restoration of Profits were computed, or, if the 
Online Calculator was used, a copy of the ``Print Viewable Results'' 
page(s) after completing use of the Online Calculator;
__f. Proof of payment of principal amount;
__g. Proof of payment of Lost Earnings or restoration of profits to 
the plan; and

    Caution: The correction amount and the costs of correction 
cannot be paid from plan assets, including by charges against 
participant accounts or plan forfeiture accounts.

__h. If application concerns delinquent participant contributions or 
loan repayments, a statement from a Plan Official identifying the 
earliest date on which participant contributions/loan repayments 
reasonably could have been segregated from the employer's general 
assets and supporting documentation on which the Plan Official 
relied?
__12. If you are an eligible applicant and wish to avail yourself of 
excise tax relief under the VFC Program Class Exemption:
__a. Have you made proper arrangements to provide within 60 calendar 
days after submission of this application a copy of the VFC Program 
Class Exemption notice to all interested persons and to the EBSA 
Regional Office to which the application is filed; or
__b. If you are relying on the exception to the notice requirement 
in section IV.C. of the VFC Program Class Exemption because the 
amount of the excise tax otherwise due would be less than or equal 
to $100.00, have you provided to the appropriate EBSA Regional 
Office a copy of a completed IRS Form 5330 or other written 
documentation containing the information required by IRS Form 5330 
and proof of payment?
__13. In calculating Lost Earnings, have you elected to use:
__a. The Online Calculator; or
__b. A manual calculation performed in accordance with section 5(b) 
of the VFC Program?
__14. If the application involves payments to participants and 
beneficiaries:
__a. Have you enclosed a description demonstrating proof of payment 
to participants and beneficiaries whose current location is known to 
the plan and/or applicant in accordance with section 5(d) of the VFC 
Program?
__b. For individuals who need to be located, have you demonstrated 
how adequate funds have been segregated to pay missing individuals 
and included a description of the process that you commenced to 
locate missing individuals in accordance with section 5(d)?
__15. For purposes of the three transactions involving participant 
contributions covered under section 7.1, has the plan implemented 
measures to ensure that such transactions do not recur?
Signature of Applicant and Date Signed:
-----------------------------------------------------------------------

Name of Applicant:
-----------------------------------------------------------------------

Title/Relationship to the Plan:
-----------------------------------------------------------------------

Name of Plan, EIN and Plan Number:
-----------------------------------------------------------------------
-----------------------------------------------------------------------

Contact information: Phone; email
-----------------------------------------------------------------------

Paperwork Reduction Act Notice

    The information identified on this form is required for a valid 
application for the Voluntary Fiduciary Correction Program of the 
U.S. Department of Labor's Employee Benefits Security Administration 
(EBSA). You must complete this form and submit it as part of the 
application in order to receive the relief offered under the Program 
with respect to a breach of fiduciary responsibility under Part 4 of 
Title I of ERISA. EBSA will use this information to determine that 
you have satisfied the requirements of the Program. EBSA estimates 
that completing and submitting this form will require an average of 
2 to 4 minutes. This collection of information is currently approved 
under OMB Control Number 1210-0118. You are not required to respond 
to a collection of information unless it displays a currently valid 
OMB Control Number.

Appendix F--SCC Retention Record Checklist

Delinquent Participant Contributions or Loan Repayments

    A self-corrector must complete this checklist, prepare or 
collect the listed documents and provide a copy of the completed 
checklist and the required documentation to the plan administrator 
(generally the plan sponsor/employer) to obtain relief under the 
SCC.
    __Did you attach a brief statement explaining why the employer 
retained the participant contributions or loan repayments instead of 
timely forwarding such amounts to the plan (the Breach).
    __Did you attach proof of payment, such as canceled checks, 
executed wire transfers, bank statements for the plan's account, or 
other documents showing the actual date the plan received the 
corrective payment(s)? If you paid the total amount of delinquent 
contributions and loan repayments (Principal Amount) separately from 
the total amount of earnings (Lost Earnings) that would have been 
earned on the Principal Amount but for the delinquency, make sure to 
attach proof of payment of both amounts. (Caution--Plan Assets, 
including charges to participant accounts or plan forfeiture 
accounts, cannot be used to pay the correction amount or the costs 
of correction);
    __Did you attach other documents (if any) to support proof of 
payment, such as offsetting overpayments or annotations that provide 
a clear record of the correction?
    __Did you attach a copy of the page(s) that results from the 
``View Printable Results'' function of the Online Calculator? Self-
correctors must use the Online Calculator to determine Lost Earnings 
and

[[Page 4231]]

print a copy of the ``View Printable Results'' page.
    __Did you attach a statement describing policies and procedures 
(if any) that the employer put into place to prevent future 
delinquencies of participant contributions or loan repayments?
    __Did you attach a copy of the SCC Notice Acknowledgement and 
Summary page that you received from EBSA after submission of the SCC 
notice?
    __Did a plan fiduciary and each plan official seeking relief 
complete the following Penalty of Perjury Statement and provide the 
signed statement to the plan administrator?
    Penalty of Perjury Statement--The following statement must be 
signed and dated by a plan fiduciary with knowledge of the 
transaction that is the subject of the SCC notice and by the 
authorized representative, if any. Each plan official who is seeking 
the relief afforded under the SCC must also sign and date the 
statement, which must be retained by the plan administrator. (In the 
case of a contributing or adopting employer in a multiemployer plan 
or multiple employer plan, the employer may sign the Penalty of 
Perjury statement and, without regard to the employer's status as a 
plan fiduciary, no other plan fiduciary need sign.)
    Under penalties of perjury I certify that I am not Under 
Investigation (as defined in VFC Program section 3(b)(3)) and that I 
have reviewed the SCC notice acknowledgement and summary, the 
checklist and all the required documentation, and to the best of my 
knowledge and belief the contents are true, correct, and complete.

Name and Title---------------------------------------------------------
Signature--------------------------------------------------------------
Date-------------------------------------------------------------------

Name and Title---------------------------------------------------------
Signature--------------------------------------------------------------
Date-------------------------------------------------------------------

    __Did a plan official complete the following authorization, if 
an authorized preparer was used to submit the SCC notice?

Authorization of Plan Official

    I have authorized ______ to submit the VFCP SCC notice.

Name of Plan Official--------------------------------------------------
Signature--------------------------------------------------------------
Date-------------------------------------------------------------------

Paperwork Reduction Act Notice

    The information identified on this form is required for a valid 
use of the Self-Correction Component for Delinquent Participant 
Contributions or Loan Repayments of the Voluntary Fiduciary 
Correction Program of the U.S. Department of Labor's Employee 
Benefits Security Administration (EBSA). You must complete this form 
and provide a copy of the completed checklist and the required 
documentation to the plan administrator to receive the relief under 
the Self-Correction Component of the Program with respect to the 
breach of fiduciary responsibility under Part 4 of Title I of ERISA 
associated with the delinquent participant contributions or loan 
repayments. EBSA may request a copy of this information to determine 
that you have satisfied the requirements of the Self-Correction 
Component of the Program. EBSA estimates assembling this information 
will require an average of 4 hours and completing this form will 
require an average of 2 to 4 minutes. This collection of information 
is currently approved under OMB Control Number 1210-0118. You are 
not required to respond to a collection of information unless it 
displays a currently valid OMB Control Number.

    Signed at Washington, DC, this 3rd day of January 2025.
Lisa M. Gomez,
Assistant Secretary, Employee Benefits Security Administration, U.S. 
Department of Labor.
[FR Doc. 2025-00327 Filed 1-14-25; 8:45 am]
BILLING CODE 4510-29-P`