"Voluntary compliance with the law benefits both workers and employers," said Ann L. Combs, Assistant Secretary of Labor of the Pension and Welfare Benefits Administration. "Employers will have an incentive to bring their plans into compliance if they can avoid enforcement actions, civil monetary penalties and prohibited transaction excise taxes. Workers' retirement security is enhanced when plans are brought into compliance and assets are restored. The voluntary compliance program announced today will promote and facilitate voluntary correction of ERISA violations."
Under the Voluntary Fiduciary Correction Program (VFCP), plan officials, sponsoring employers or parties to affected transactions may apply for certain relief in connection with their voluntary correction of specific violations of the law. Applicants must fully correct any prohibited transactions, calculate any losses and restore those losses with interest or profits, and distribute any supplemental benefits owed to eligible participants and beneficiaries. If properly corrected, plan officials will receive a "no action" letter indicating there will be no further enforcement action by the Labor Department on the corrected transaction.
To address concerns about the excise tax, the department also published a proposed class exemption to provide limited relief from the excise tax imposed on prohibited transactions under the Internal Revenue Code. The relief would apply to four transactions included in the VFCP as long as plan officials comply with the conditions of the exemption. The proposed exemption is available for use immediately while the department accepts public comments. The IRS has advised it will not impose excise taxes on transactions covered by the program.
Another program, known as the Delinquent Filer Voluntary Correction Program (DFVC), established in April 1995, encourages plan administrators to file overdue annual reports by paying reduced penalties. The program has been updated to substantially reduce the penalty amounts for delinquent Form 5500 reports and make it easier to participate in the program. The changes are intended to make the program more attractive, especially to small businesses, as a way to bring plans into compliance with the law.
"We are particularly pleased to announce that the IRS and PBGC have agreed to join us in providing certain penalty relief for delinquent filers that participate in this program," said Combs.
For more information about the fiduciary correction program, the employers and the benefit community can contact a local regional office by calling the Toll-Free Employee & Employer Hotline: 1.866.275.7922. Questions on the delinquent filer program should be directed to 202.693.8360.
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U. S. Department of Labor has announced two programs to make it easier for employers and plan officials to correct certain violations with employee benefit plans and voluntarily comply with the Employee Retirement Income Security Act.