New Self-Correction Option for Late Plan Remittances
Published on by Jessica Doremus in Benefit Plan Audits
- The new Self-Correction Component (SCC) gives eligible plan sponsors a faster, simpler way to correct certain late remittances without submitting a full VFCP application.
- Eligibility depends on meeting specific DOL requirements, including limits on lost earnings, deposit timing, and correction procedures.
- Proper documentation is critical because the SCC doesn’t issue a No Action letter, making your records the primary evidence of correction.
- More complex or recurring late remittances still require the traditional VFCP application process and DOL review.
- Strong payroll processes and internal controls can help reduce the risk of future late remittances and ongoing compliance issues.
Late remittances remain one of the most common compliance issues retirement plan sponsors face. When employee contributions or loan repayments are withheld from payroll but aren’t deposited into the plan on time, the Department of Labor (DOL) treats the delay as a fiduciary breach under ERISA.
The good news is that a recent update to the DOL’s Voluntary Fiduciary Correction Program (VFCP), effective March 17, 2025, introduced a new Self-Correction Component (SCC). It gives plan sponsors a faster, simpler path to resolving certain late deposit failures. Here’s what you need to know.
What’s the self-correction component?
The SCC is a streamlined alternative to the full VFCP application process. Rather than submitting a formal application to the DOL for review, eligible plan sponsors can self-correct certain late remittances and file an electronic notice through the DOL portal. The plan sponsor won’t receive a No Action letter. However, eligible corrections may still qualify for relief from penalties and interest.
The SCC is available to plans of any size. Unlike the prior VFCP rules, which limited corrections to once every three years, the new program doesn’t impose a frequency cap.
Is your plan eligible?
Not every late remittance qualifies for self-correction. To use the SCC, all of the following criteria must be met:
- The total lost earnings on the delinquent contributions or loan repayments must be less than $1,000, calculated using the DOL’s online calculator.
- The delinquent contributions must have been remitted to the plan within 180 calendar days from the date of participant withholding or loan receipt.
- Both the delayed amount and the lost earnings must be deposited before the SCC notice is submitted.
- Neither the plan nor the plan sponsor can be under a DOL or IRS investigation at the time of correction.
If the late remittance is recurring, significant, or doesn’t meet these requirements, a full VFCP application is still required.
How does the process work?
If your plan qualifies, the correction steps are straightforward:
- Deposit the delayed contributions and lost earnings into the plan before filing.
- Calculate lost earnings using the DOL’s designated online calculator, applied from the earliest date the contributions or loan repayments could reasonably have been separated from employer assets.
- Prepare a document checklist signed by a plan fiduciary and each plan administrator.
- File an electronic notice through the DOL portal. You’ll receive an acknowledgment email upon submission.
- Retain all records, including payroll records, deposit confirmations, the lost earnings calculation, and the acknowledgment email. Because the SCC doesn’t produce a No Action letter, your documentation serves as the primary evidence that the correction was completed.
When is a full VFCP application required?
The traditional VFCP application process remains available and is the required path for larger, repeated, or more complex late remittance issues. Plan sponsors who go this route submit documentation directly to the DOL, which may review the submission and request additional information.
If approved, the DOL issues a No Action letter, providing a formal record of resolution that can be valuable during future audits or reviews.
Preventing future issues
Correcting a late remittance is only part of the solution. The DOL recommends working with your payroll provider to identify the earliest date contributions can be separated from company assets, then establishing internal controls around that date to help ensure deposits happen consistently and on time.
For plans with fewer than 100 participants, a seven-business-day safe harbor applies, but most plans should aim to make deposits well before any deadline.
Next steps
The new Self-Correction Component offers a welcome option for plan sponsors dealing with isolated, short-term deposit delays. But determining whether your situation qualifies, calculating lost earnings correctly, and maintaining proper documentation all require careful attention to detail.
Our team of top employee benefit plan pros can help you navigate VFCP compliance, correct plan errors, and put the right controls in place to help prevent them from recurring. If you have questions or need support with a plan audit or correction, contact us today for a free consultation. As always, we’re here to help.
Additional resources
You may be interested in our employee benefit plan audit video series, available on-demand, or the most recent 401(k) plan management report. We also have an employee benefit plan audit FAQ page, a helpful resource with answers to some of the most frequently asked questions on the topic.
