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1. General. The Voluntary Fiduciary Correction Program (VFCP)
is a voluntary enforcement program that allows plan officials
to identify and fully correct certain transactions such as
prohibited purchases, sales and exchanges; improper loans;
delinquent participant contributions; and improper plan
expenses. The program includes 19 specific transactions and
their acceptable means of correction, eligibility
requirements, and application procedures. If an eligible party
documents the acceptable correction of a specified
transaction, EBSA will issue a no-action letter. (Figure
1)
2. Eligibility to Participate in the
VFCP. Anyone who may
be liable for fiduciary violations under ERISA, including
employee benefit plan sponsors, officials, and parties in
interest, may voluntarily apply for relief from enforcement
actions provided they meet the criteria and follow the
procedures outlined in the VFCP. The Department will consider
an application if neither the plan nor the applicant is under
investigation, the application contains no evidence of
potential criminal violations as determined by EBSA, and EBSA
has not conducted an investigation which resulted in written
notice to a plan fiduciary that the transaction, for which the
potential applicant could otherwise have sought relief under
the VFCP, has been referred to the IRS. A plan or potential
applicant is “under investigation” if: a plan official, or
a representative, has received oral or written notification
from EBSA of an investigation of the plan or of the potential
applicant or plan sponsor in connection with an act or
transaction directly related to the plan; any governmental
agency is conducting a criminal investigation of the plan, or
of the potential applicant or plan sponsor in connection with
an act or transaction directly related to the plan; the Tax
Exempt and Government Entities Division of the IRS is
conducting an Employee Plans examination of the plan; or the
Pension Benefit Guaranty Corporation, any state attorney
general, or any state insurance commissioner is conducting an
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, unless the applicant notifies
EBSA, in writing, of such an investigation or examination at
the time of the application. A plan is not considered to be
under investigation by EBSA merely because EBSA staff has
contacted a plan official with a complaint, unless the
complaint concerns the transaction described in the
application and the plan has not received the correction
amount due under the VFCP by the time EBSA contacts the plan
official.
3. Application Procedures. Each application must be
prepared by the applicant or his or her authorized
representative. If a representative submits the application,
the application must include a statement signed by the
applicant that the representative is authorized to represent
the applicant. The application must also include the name,
address, and telephone number of a contact person who must be
familiar with the contents of the application, and have
authority to respond to inquiries from EBSA.
4. Application Contents. The applicant must provide a
detailed narrative describing the breach and the corrective
action. The narrative must include: a list of all persons
materially involved in the breach and its correction; the EIN
and address of the plan sponsor and administrator; the date
the plan’s most recent Form 5500 was filed; an explanation
of the breach; an explanation of how the breach was corrected,
by whom and when; calculations demonstrating how the principal
amount and lost earnings or restoration of profits were
computed; and an explanation of why payment of lost earnings
or restoration of profits was chosen to correct the breach.
Additional supporting documentation must include: a copy of
the relevant portions of the plan document or any other
pertinent documents; documentation in support of the narrative
description of the transaction and correction; documentation
establishing lost earnings and restoration of profits amounts;
documentation relating to the specific transaction; a
completed application checklist (Figure 2); and, proof of
payment of the principal amount and lost earnings or
restoration of profits. The application must also include a
penalty of perjury statement, signed and dated by a plan
fiduciary with knowledge of the transaction. In addition, each
applicant must sign and date the Penalty of Perjury statement.
(Figure 3) The statement must also accompany any subsequent
additions to the application.
5. Eligible Transactions and Corrections Under the
VFCP.
Any plan official may correct any of the eligible transactions
in accordance with the applicable correction method. In
addition, an amendment to the Class Exemption to Permit
Certain Transactions Identified in the Voluntary Fiduciary
Correction Program grants relief from the excise tax on
prohibited transactions imposed by section 4975(a) of the
Internal Revenue Code. See Federal Register Volume 71, Number
75, Pages 20135-20139, April 19, 2006 for a full description
of the transactions eligible for this relief.
6. Filing. The application shall be mailed to the
appropriate Regional Office.
7. Tracking. VFCP applications will be tracked, from date
of receipt in the Regional Office, through current EBSA
databases under Program 15. Within five working days of
receipt, a post card or letter should be sent to the applicant
to acknowledge receipt of the application.
8. Custody of Applications. Each office shall maintain
physical custody of applications properly submitted to it. If
an application has been misdirected, the recipient office will
forward the application to the appropriate Regional Office.
Field office staff should treat applications as confidential
and restrict access to the reviewer, his or her supervisor,
and other EBSA staff assigned to such matters. Application
files should be maintained together in sequential order in a
secure area.
9. Review of Applications. Each application will be
reviewed to ensure that it is complete and that the
eligibility criteria have been met. Once this is established,
each application will be reviewed to ensure that proper
documentation has been provided to ensure full correction in
compliance with the terms of the VFCP.
10. Inadequate Correction. If the correction set forth in
the application is incomplete or unacceptable under the VFCP,
EBSA may reject the application and pursue enforcement under
Chapter 48, 52 or 53, as appropriate.
11. Issuance of No-Action Letter. If the application is
found to be complete and all breaches in question have been
appropriately corrected, then EBSA may issue a no-action
letter to the applicant.
12. Disposition. The disposition of the application must be
documented in current EBSA databases and a copy of the signed,
dated no-action letter, signed by the Regional Director or
his/her designee, must be maintained in the application file.
(Figure 1)
Applicant
Address
RE: VFCP Application No. xx-xxxxxxx
Dear Applicant:
The Department of Labor, Employee Benefits
Security Administration (EBSA), has responsibility for
administration and enforcement of Title I of the Employee
Retirement Income Security Act of 1974, as amended (ERISA).
EBSA has established a Voluntary Fiduciary Correction Program
(VFCP) to encourage the correction of breaches of fiduciary
responsibility and the restoration of losses to the plan
participants and beneficiaries.
In accordance with the requirements of the VFCP,
you have identified the following transactions as breaches, or
potential breaches, of part 4 of Title I of ERISA, and you
have submitted documentation to EBSA that demonstrates that
you have taken the corrective action indicated.
[Briefly recap the violation and
correction. Example: Failure to deposit participant
contributions to 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).]
Because you have taken the above-described
corrective action that is consistent with the requirements of
the VFCP, EBSA will take no civil enforcement action against
you with respect to this breach. Specifically, EBSA will not
recommend that the Solicitor of Labor initiate legal action
against you, and EBSA will not impose the penalty in section
502(l) [or section 502(i)](1)
of ERISA on the amount you have repaid to the plan.
EBSA’s decision to take no further action
is conditioned on the completeness and accuracy of the
representations made in your application. You should note that
this decision will not preclude EBSA from conducting an
investigation of any potential violations of criminal law in
connection with the transaction identified in the application
or investigating the transaction identified in the application
with a view toward seeking appropriate relief from any other
person.
[If the transaction is a prohibited
transaction for which no exemptive relief is available, add
the following language: Please also be advised that pursuant
to section 3003(c) of ERISA, 29 U.S.C. Section 1203(c), the
Secretary of Labor is required to transmit to the Secretary of
Treasury information indicating that a prohibited transaction
has occurred. Accordingly, this matter will be referred to the
Internal Revenue Service.]
In addition, you are cautioned that EBSA’s
decision to take no further action is binding on EBSA only.
Any other governmental agency, and participants and
beneficiaries, remain free to take whatever action they deem
necessary.
We are pleased you have taken the
opportunity to correct the identified transactions, and
encourage you to review all of your employee benefit plans to
determine if there are other violations which should be
corrected. Please note that the VFCP has recently been
expanded to include additional transactions. We have enclosed
a list of all eligible transactions for your benefit.
If you have any questions about this
letter, you may contact the Regional VFCP Coordinator at applicable
address and telephone number.
Sincerely,
Regional Director (or designated person)
Enclosure
Covered Transactions in the Voluntary
Fiduciary Correction Program
-
Delinquent Participant
Contributions and Participant Loan Repayments to Pension
Plans
-
Delinquent Participant
Contributions to Insured Welfare Plans
-
Delinquent Participant
Contributions to Welfare Plan Trusts
-
Fair Market Interest
Rate Loans With Parties in Interest
-
Below Market Interest
Rate Loans With Parties in Interest
-
Below Market Interest
Rate Loans With Non-Parties in Interest
-
Below Market Interest
Rate Loans Due to Delay in Perfecting Security Interest
-
Participant Loans
Failing to Comply with Plan Provisions for Amount,
Duration, or Level Amortization
-
Defaulted Participant
Loans
-
Purchase of Assets by
Plans from Parties in Interest
-
Sale of Assets by Plans
to Parties in Interest
-
Sale and Leaseback of
Property to Sponsoring Employers
-
Purchase of Assets from
Non-Parties in Interest at More Than Fair Market Value
-
Sale of Assets to
Non-Parties in Interest at Less Than Fair Market Value
-
Holding of an Illiquid
Asset Previously Purchased by Plan
-
Benefit Payments Based
on Improper Valuation of Plan Assets
-
Payment of Duplicate,
Excessive, or Unnecessary Compensation
-
Improper Payment of
Expenses by Plan
-
Payment of Dual
Compensation to Plan Fiduciaries
(Figure 2)
Use this checklist to ensure that you are
submitting a complete application. The applicant must sign and
date the checklist and include it with the 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.
______ 1. Have you reviewed the
eligibility, definitions, transaction and correction, and
documentation sections of the VFCP?
______ 2. Have you included the name,
address and telephone number of a contact person familiar with
the contents of the application?
______ 3. Have you provided the EIN, Plan
Number, and address of the plan sponsor and plan
administrator?
______ 4. Have you provided the date that
the most recent Form 5500 was filed by the 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?
______ 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. Where applicable, have you
enclosed a copy of an appraiser's report?
______ 9. 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 and Lost Earnings or Restoration of Profits; and
______ g. If application concerns
delinquent employee 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?
______ 10. If you are an eligible applicant
and wish to avail yourself of excise tax relief under the VFCP
Class Exemption:
_______a. Have you made proper arrangements
to provide within 60 calendar days after submission of this
application a copy of the 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
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?
______ 11. 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)?
______ 12. Where applicable, have you
enclosed a description demonstrating proof of payment to
participants and beneficiaries whose current location is known
to the plan and/or applicant, and for individuals who need to
be located, have you demonstrated how adequate funds have been
segregated to pay missing individuals and commenced the
process of locating the missing individuals using either the
IRS and SSA locator services, or other comparable means?
______ 13. For purposes of the three
transactions 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:
_______________________________________________________________________
(Figure 3)
“Under penalties of perjury I certify
that I am not Under Investigation (as defined in VFCP Section
3(b)(3)) 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 ___________________
-
Include reference to
502(i) in applications involving a welfare plan.
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