Additionally, as dictated by Secure 2.0, the amendments align the U.S. Department of Labor (DOL) corrective procedures with the IRS Employee Plans Compliance Resolution System (EPCRS) for certain inadvertent loan failures. While the SCC simplifies correction procedures for small delinquent contributions and loan repayments, VFCP remains the only approved correction for many late contributions.

Key takeaways

• Effective March 17, 2025, plans may have the option to submit an SCC Notice to the DOL for small delinquent contributions and loan repayments.
• To be eligible, delinquent contributions must be remitted with earnings within 180 days of the withholding date, and the lost earnings must be less than $1,000.
• Plans receive an email acknowledgment of their SCC submission but don’t receive a no-action letter from the DOL.
• If the plan error meets the SCC requirements, excise tax is waived, and no IRS Form 5330 is needed.
• Other inadvertent participant loan failures can be corrected using the SCC.

New Self-Correction Component 

Under the SCC, plan sponsors can notify the DOL of delinquent employee deferrals or loan repayments without filing a formal VFCP application. Plan sponsors continue to correct such failures by remitting the delinquent contributions and loan repayments, as well as lost earnings to the plan. Consistent with the VFCP requirements, plan sponsors must compile and retain correction documentation. The SCC, however, requires the plan administrator to retain the documentation, rather than requiring submission of these records. 

Using the SCC mandates calculation of lost earnings based on the pay date (or date received by the employer), rather than the subjective standard of the DOL rule, the earliest date contributions could reasonably have been segregated from the employer’s general assets.  

Additionally, submitting the SCC Notice enables plan sponsors to use the VFCP online calculator, which was previously limited to VFCP applicants.

SCC requirements

• SCC Notice instead of a full VFCP application—The notice includes the name and contact information of the plan and SCC submitter, dates of the error and correction, and the number of participants impacted.
• SCC retention record checklist—Plans must complete the SCC Retention Record Checklist  and retain it along with associated documentation. While the checklist doesn’t need to be submitted to the DOL, the plan must retain this documentation as record of the error and proof of correction. 
• Statement plan isn’t under investigation—A plan official must sign a statement confirming that neither the plan nor its officials are under investigation and acknowledging review of the documentation, SCC Notice, and checklist.

Errors eligible for the new SCC

To be eligible for the SCC, the delinquent contribution or loan repayment must be remitted to the plan no later than 180 days after the associated pay date. If a plan sponsor waits until an auditor identifies a delinquency after year end, it may be too late to use the SCC. Additionally, only errors with calculated lost earnings of $1,000 or less are eligible.

Can a series of late payrolls be treated as individual late contributions to remain below the $1,000 dollar cap? This is likely permissible as the preamble to the final amendment states that the DOL generally considers each delinquent payroll as a separate error. SCC submission for each separate error may seem difficult; however, plan sponsors may prefer this to filing the more involved VFCP application for multiple pay periods. The preamble also acknowledges that the DOL permits plans to submit one VFCP filing for multiple pay periods over a certain time frame. 

Guidelines on Form 5330 and excise tax

Under the SCC, plans can avoid filing Form 5330 and paying excise tax if the plan sponsor instead remits the calculated excise tax amount to the plan and allocates it to affected participants in the same manner as allocation of lost earnings. By submitting the SCC Notice, plans avoid filing a full VFCP application and avoid providing notice to interested persons. Plans, however, must retain a copy of a completed (but unfiled) Form 5330 or other documentation showing the amount of the excise tax and proof of remittance to the plan.

Other Voluntary Fiduciary Correction Program changes

Other changes are included in the VFCP and PTE 2002-51 amendments:

• Allows for use of the SCC for inadvertent loan failures that have been corrected according to EPCRS. This includes failures to withhold loan repayments from participant’s wages, exceeding the number of permissible loans under the plan, failure to obtain spousal consent, and errors related to the amount, level of amortization, or duration of the loan. Plans can submit the SCC filing for these inadvertent loan failures without completing the SCC Retention Record Checklist
• Permits requests for excise tax waiver more frequently than once in three years for plan sponsors with repeat errors
• Clarifies that participating employers in a multiemployer or multiple employer plan can file their own VFCP submission or SCC submission without the need for signature or approval of a plan fiduciary 

Navigating SCC and VFCP changes

The SCC and changes to the VFCP are welcome modifications to the DOL’s voluntary correction program. Plan sponsors are encouraged to report correction of small late contributions, without the burden of the full VFCP submission. It also makes available use of the VFCP online calculator. Finally, waiving the requirement to file and pay small excise tax amounts provides great benefit to plans with minor delinquent contributions and loan repayments. 

The VFCP will still be appropriate under many circumstances; for example, if a plan discovers delinquent contributions for which lost earnings are more than $1,000, and/or haven’t been remitted with earnings within 180 days of when the amounts were withheld from participants’ paychecks, the VFCP is still applicable. Additionally, while the DOL provides acknowledgment of receiving an SCC Notice, plans don’t receive the no-action letter they would otherwise receive under a VFCP submission.