November 2026 - Retirement Plan Updates
Overview:
The IRS recently overhauled the EPCRS and launched an IRA correction program.
Section 305 of the SECURE 2.0 Act directed the Treasury to expand retirement plan self-correction procedures so most inadvertent failures could be self-corrected, and to extend EPCRS corrections to Individual Retirement Accounts (IRAs).
On October 22, 2026, the IRS and Treasury released two revenue procedures implementing SECURE 2.0 requirements, reshaping how retirement plan corrections are handled: (1) Rev. Proc. 2026-34 and (2) Rev. Proc. 2026-33.
(1) Rev Proc. 2026-34 – EPCRS Correction Update
Rev. Proc. 2026-34 is the long-awaited update to the Employee Plans Compliance Resolution System (EPCRS) following SECURE 2.0 requirements. It replaces Rev. Proc. 2021-30 and took effect immediately. Now, plan sponsors may fix more errors through the self-correction program rather than the voluntary correction program.
Note, however, that 2026-34 and SECURE 2.0 did not eliminate voluntary correction program or the audit closing agreement program and remain necessary avenues for qualifying failures. For example, self-correction remains unavailable for egregious failures, diversion or misuse of plan assets, orphan plans, failure to initially adopt a written plan, and retroactive amendments that reduce participant benefits.
Self-correction is now the default for most inadvertent errors
Self-correction now covers any "Eligible Inadvertent Failure," meaning a failure that occurs despite practices and procedures reasonably designed to promote compliance. Therefore, sponsors can self-correct more plan document failures, demographic failures, employer eligibility failures, and participant loan failures without the VCP process.
• No determination letter: Qualified retirement plans and 403(b) plans no longer need a favorable letter to use self-correction.
• SEPs and SIMPLE IRA plans may self-correct more broadly if they meet certain plan document requirements.
• Clear timing safe harbor: A correction is deemed timely based on clear safe harbor guidelines.
• Audit timing matters: Once a plan is under IRS examination, self-correction is generally limited to insignificant operational failures, or failures the sponsor had already demonstrated a specific commitment to correct before the audit began.
Automatic enrollment deferral safe harbor made permanent
Rev. Proc. 2026-34 makes the automatic enrollment deferral safe harbor permanent and covers SEPS, SIMPLE IRA plans, employees who terminated before correction, and after-tax contributions.
Plan sponsors are also given more time to make up missed matching contributions.
More flexibility on overpayments
Plan sponsors generally need not recoup or restore an inadvertent benefit overpayment, and the overpayment can be rolled over. Overpayments caused by Section 401(a)(17), 415, or 436 failures are excluded from that relief and still generally require a corrective payment to the plan.
However, per the new de minimis rule, if an overpayment totals $250 or less, the sponsor need not seek recovery, make a corrective contribution, or send a rollover-ineligibility notice. Similarly, notice is no longer required for excess amounts of $250 or less, and those amounts need not be distributed or forfeited.
Targeted correction method changes
Some targeted changes were also made to corrections. A few examples: (i) Using a commercial locator service is now deemed a reasonable search for lost participants (ii) a late discretionary amendment is now treated as an operational failure rather than a plan document failure (iii) new correction method applies when all non-highly compensated employees were excluded from deferrals.
(2) Rev. Proc. 2026-33 – IRA Correction Program
Rev. Proc. 2026-33, creates the first formal correction program for Individual Retirement Accounts (IRA’s) – IRA Compliance Resolution System - and becomes effective May 1, 2027.
Historically, IRAs lacked a formal correction path with the exception of narrow SIMPLE IRA plan corrections, IRA mistakes typically required a private letter ruling or simply went unfixed. Now, the IRA Compliance Resolution System (ICRS), allows for such corrections as a voluntary correction, but does not currently permit self-correction.
The ICRS voluntary correction procedure is limited to four categories:
(i) Required Minimum Distribution Failures
(ii) IRA establishment failures
(iii) Nonspouse beneficiary distribution or rollover failures and
(iv) 60 day rollover failures. Note that only the owner may request relief for a 60-day rollover failure.
However, egregious failures, diversion or misuse of IRA assets, and abusive tax avoidance transactions are excluded.
Corrections must be implemented within 90 days of the IRS compliance statement (150 days for group submissions).
Plan-level failures in SEP and SIMPLE IRA plans remain under EPCRS.
Key takeaways for employers:
1. The new rules apply now. Rev. Proc. 2026-34 took effect October 22, 2026. Any correction underway, including drafts of pending voluntary correction filings, should be re-evaluated under the new procedure. Some failures headed for voluntary correction may now qualify for SCP.
2. Maintain and document written compliance procedures. Expanded self-correction depends on showing the failure occurred despite established practices and procedures. Sponsors should confirm procedures are documented, current, and followed. Similarly, sponsors should document each failure, correction methods, calculations, and completion date.
3. Timely Correct. Identify failures and take action as soon as possible to ensure you meet the applicable correction deadline.
4. Revisit overpayment policies. Decide whether the plan will pursue recoupment of inadvertent overpayments and apply the $250 de minimis rule consistently.
5. Monitor TPAs and Recordkeepers. Monitor your service providers and update service agreements and correction protocols accordingly.
6. Plan for the IRA program. Plan sponsors should prepare for the May 2027 IRA voluntary correction program and act accordingly.
How Momentum Advisors can help:
The updated EPCRS is the most significant change to the IRS correction program in years. We can help assess pending and newly discovered failures, choose between correction procedures, document corrections, advise on appropriate course of action, and update compliance procedures and service provider protocols.
Reach us via LinkedIn or email at: info@momentumadvisors.law