Treasury, IRS Expand Retirement Plan Correction Options

The Treasury Department and the Internal Revenue Service on Thursday issued two revenue procedures updating the correction program for employer-sponsored retirement plans and creating a new correction program for individual retirement accounts.

Revenue Procedure 2026-34 expands and restructures the Employee Plans Compliance Resolution System, replacing Revenue Procedure 2021-30. The update broadens the availability of self-correction for eligible inadvertent failures, including certain plan-loan errors and incorporates new rules governing retirement-plan overpayments and automatic-enrollment correction safe harbors. The updated guidance is effective immediately.

EPCRS includes the Self-Correction Program, Voluntary Correction Program and Audit Closing Agreement Program. Together, those programs allow sponsors of qualified plans, 403(b) plans, SEP arrangement and SIMPLE IRA plans to correct compliance failures and maintain their tax-favored status.  

“For employers that are sponsoring 401(k) and 403(b) and tax qualified retirement plans, the most important practical consequence is that this will provide plan sponsors with broader opportunities to correct retirement plan compliance failures themselves without first obtaining advanced IRS approval or paying a voluntary correction program user fee,” says Claire Rowland, partner at Morgan Lewis & Bockius LLP.

According to Rowland, these corrections will be especially meaningful for sponsors who discover administrative failures, whether it be during compliance testing, internal auditing or transitioning through recordkeepers.

“What [plan sponsors] should be doing now is taking a look at their internal correction processes and looking at how they document those for purposes of qualifying for self-correction under the new ECPRS,” says Rowland. “You would want to be involving [advisers] in that process both with respect to any previously identified failures that may now qualify for self-correction rather than having to pursue VCP.”

Additionally, Revenue Procedure 2026-33 established the IRA Compliance Resolution System, or ICRS.

Procedure 2026-33 is mandated by the Setting Every Community Up for Retirement Enhancement 2.0 Act of 2022, is modeled after the EPCRS and creates a formal mechanism for correcting certain eligible inadvertent failures involving IRAs.

Under ICRS, IRA custodians and owners may request correction of certain failures resulting from service-provider errors. The program also provides a new process for retirement plan participants and IRA owners seeking waivers of the 60-day rollover requirement.

Currently, taxpayers generally must request such waivers through the private letter ruling process. The IRS said those requests will transition to ICRS during 2027 and 2028.

“These procedures are part of our effort to make complying with the nation’s tax laws easier and less burdensome for taxpayers,” said IRS CEO Frank Bisignano, in a statement.

Currently, taxpayers generally must request such waivers through the private letter ruling process. The IRS said those requests will transition to the ICRS during 2027 and 2028.

For advisers, custodians and recordkeepers, the new system creates a formal framework for correcting certain IRA-related errors and may provide a more streamlined alternative to existing procedures in some circumstances.

Advisers who assist IRA owners with rollovers and post-rollover error corrections may gain a more structured path for resolving certain mistakes without relying on the private letter ruling process.

For plan sponsors, the updated procedure provides expanded guidance on correcting operational and administrative errors while consolidating existing rules into a reorganized framework intended to make the correction process easier to navigate.

Existing automatic-waiver and self-certification procedures remain available at no cost for taxpayers who meet the requirements under Revenue Procedures 2020-46, 2016-47 and 2003-16.

The ICRS revenue procedure becomes effective May 1, 2027. Treasury and the IRS are seeking public comment on both programs by January 20, 2027, and identified specific issues on which feedback is requested.