Publication
Mistakes Happen – IRS Updates Its Retirement Plan Correction Program
By Anne M. Meyer, Amberlee Lapointe, and Libby M. Brown
Mistakes happen in every retirement plan: an eligible employee is left out, a payroll deduction is missed, or a participant loan goes unpaid. Left uncorrected, these errors can put the plan’s tax-favored status at risk. The IRS’s Employee Plans Compliance Resolution System (“EPCRS”) lets employers fix errors and keep that status. EPCRS has three correction programs: (1) the Self-Correction Program (“SCP”), which requires no IRS filing or fee; (2) the Voluntary Correction Program (“VCP”), where the employer files with the IRS and pays a fee for formal approval; and (3) the Audit Closing Agreement Program (“Audit CAP”), a negotiated (and usually costlier) fix if the IRS finds the error during an audit.
On October 22, 2026, the IRS updated EPCRS by issuing Revenue Procedure 2026-34 (the “Revenue Procedure”). The Revenue Procedure, effective immediately, replaces Revenue Procedure 2021-30, the prior version of EPCRS, and makes permanent the temporary relief issued after the SECURE 2.0 Act of 2022. For more information about the prior temporary relief, see our SW Benefit Blogs, “SECURE 2.0 Expands Self-Correction Under EPCRS” and “IRS Provides Guidance on Benefit Overpayment Rules, Reconciles SECURE 2.0 with EPCRS.”
The Revenue Procedure applies to qualified plans, 403(b) plans, SEP arrangements, and SIMPLE IRA Plans. Key changes under the updated EPCRS include the following:
- More Errors Can Be Self-Corrected. Most inadvertent errors can now be self-corrected under SCP, including some plan document errors, eligibility errors, and common loan errors. Certain failures, however, remain ineligible for self-correction, including the correction of a failure to initially adopt a written plan and the correction of an operational error by retroactively amending the plan to match how it was actually administered if that amendment is less favorable to participants. The Revenue Procedure also eliminates the requirement that a plan have a favorable determination letter to use SCP and permits self-correction by SEP arrangements and SIMPLE IRAs that meet certain plan document requirements.
- Timing for Self-Correction. Self-corrected errors must be corrected within a reasonable time after the employer discovers them. A self-correction is deemed timely under SCP if it is completed by the later of (1) the last day of the third plan year after the plan year in which the error occurred or (2) 18 months after the employer identified the error. The self-correction window generally closes once the plan is under IRS audit, but even then, certain errors may still be self-corrected if they are not significant or if, before the audit, the employer took steps showing a specific commitment to make the correction.
- Recouping Overpayments. Employers generally are not required to recover benefit overpayments made by honest mistake, except where the overpayment exceeded certain tax law limits. The Revenue Procedure also adds a new $250 exception for overpayments due to a failure under Internal Revenue Code Sections 401(a)(17), 415, or 436. Plan sponsors that wish to seek recoupment should separately consider whether ERISA Section 206(h) limits recoupment.
- Expanded Correction for Automatic Enrollment Errors. In a plan with automatic enrollment, an employer that misses an employee’s deferrals generally does not have to make a corrective contribution for those missed deferrals if the error is caught within a set period, the employer contributes any missed matching contributions, and the employee receives a notice within a set period. The Revenue Procedure clarifies that this correction applies to employees who terminated employment before the error is corrected. This relief is now permanent and has been expanded to cover SEP arrangements and SIMPLE IRAs.
- Other Notable Changes. Among other things, the Revenue Procedure also: (1) eliminates the requirement to notify an individual that an excess amount of $250 or less is not an eligible rollover distribution; (2) revises and expands the procedures for group VCP submissions, including reducing the threshold for a group submission from 20 plans to 10 plans; (2) revises procedures for locating lost participants, including by deeming it reasonable to use a commercial locator service; (3) revises the correction principle for a spousal consent failure to require that the spouse receive the benefit to which the spouse is entitled; and (4) adds a safe harbor correction method for failing to provide a suspension of benefits notice in a defined benefit plan.
What Should Employers Do?
In light of the Revenue Procedure, employers should consider the following steps:
- Review Compliance Practices and Procedures: Does the plan have established, written practices and procedures? Should they be updated in light of the updated EPCRS? Established, written practices and procedures remain a requirement for self-correction, and employers may need them to support self-correction if the IRS examines the plan.
- Revisit Pending Corrections: Are there known errors that may now be eligible for self-correction? Does the employer need to make changes to a pending correction based on the updated EPCRS?
- Coordinate with Service Providers: Do the plan’s recordkeeper and third-party administrator understand the updated correction methods and deadlines? Employers should confirm that their providers are applying the Revenue Procedure rather than the prior version of EPCRS.
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