Executive summary: More flexibility for correcting retirement plan failures

The IRS has issued guidance updating the Employee Plans Compliance Resolution System (EPCRS), giving retirement plan sponsors additional flexibility to self-correct certain plan failures while changing several correction methods and deadlines. Rev. Proc. 2026-34 incorporates changes made by SECURE 2.0 and interim IRS guidance and replaces Rev. Proc. 2021-30.

The updated procedure expands the period deemed reasonable for certain self-corrections, revises rules for missed employee deferrals and clarifies correction options for participating employers and missing participants. Although these changes can broaden access to self-correction, procedural requirements remain important. In particular, sponsors relying on safe harbor relief for certain missed deferrals need to satisfy applicable participant notice requirements.

Plan sponsors addressing existing failures can benefit from reviewing the new rules before completing a correction and documenting the failure, correction method, completion date and measures taken to prevent recurrence. Maintaining that documentation can help substantiate self-correction in a later IRS examination.

Consolidating guidance on employee retirement plan corrections

The IRS has issued Rev. Proc. 2026-34 (the procedure), which updates the EPCRS effective Oct. 22, 2026, and replaces Rev. Proc. 2021-30.

EPCRS allows sponsors of plans under Internal Revenue Code sections 401(a), 403(a), 403(b), 408(k) and 408(p) to correct certain plan failures while preserving tax-favored benefits. Its three components are the Self-Correction Program (SCP), the Voluntary Correction Program (VCP) and the Audit Closing Agreement Program (Audit CAP). The procedure incorporates SECURE 2.0 provisions; prior interim guidance in Notices 2023 43, 2024 2 and 2024 77; and other updates.

While the procedure contains numerous updates, some changes are particularly notable.

Key changes to EPCRS

More time for certain self-corrections. The procedure expands the allowable period for correcting an eligible inadvertent failure. Notice 2023-43 provided that a reasonable period to correct an eligible inadvertent failure was within 18 months after identification. Under the new procedure, correction is timely if completed by the later of (1) the last day of the third plan year following the plan year in which the failure occurred or (2) 18 months after the plan sponsor identifies the failure.

Correction of missed deferral failures. The procedure makes the following changes to the correction guidance for failures in providing an employee with the opportunity to contribute to the plan or in implementing an employee’s election to contribute:

• Terminated employees and after-tax employee contributions are now eligible for the safe harbor correction method that permits a reduced qualified nonelective contribution (QNEC) for failures lasting more than three months but corrected no later than the end of the third plan year following the year of the failure.
• After a deferral failure, employers now have 12 months after correct deferrals begin (or would have begun for a terminated employee) to make corrective matching contributions. Under Notice 2024-2, the deemed reasonable period to deposit matches owed was six months.
• The procedure eliminates the brief exclusion rule. Under that prior rule, an employer generally did not have to make a QNEC for a missed elective deferral or after-tax employee contribution if the participant had an opportunity to contribute for at least nine months of the plan year.
• The procedure eliminates the previously applicable sunset provision under the SECURE 2.0 safe harbor correction method for plans with automatic enrollment or escalation features. What remains consistent is the requirement to provide a notice to an affected participant within 45 days after implementing the correct deferral election—a requirement that is easily overlooked. Employers that fail to provide timely notice may lose the safe harbor and be required to make a QNEC for the missed deferral.

Clarification for participating employers. An employer cannot use SCP for a failure to initially adopt a written plan document. The procedure clarifies how to handle an employer’s failure to formally adopt an established plan as a participating employer even though its employees are participating in the plan. In that situation, the employer can self-correct the failure through a retroactive amendment where the employer adopts the plan as a participating employer.

Updated procedures for locating missing participants. Plan sponsors must take reasonable actions to locate participants and beneficiaries who are owed benefits. Under the procedure, using a qualifying commercial locator service that relies on a consumer reporting agency database will qualify as “reasonable action.” However, employers are still required to provide the benefit if the individual is later located.

Noteworthy items

Favorable letter. Plans under Code section 401(a) and 403(b) are not required to have a favorable letter (i.e., determination or opinion letter) to qualify for self-correcting an eligible inadvertent failure, as addressed in Notice 2023-43. Given the widespread use of pre-approved plan documents, this is a nonissue for many employers; however, employers using individually designed plan documents may find that this allows them to take advantage of SCP as opposed to having to make a VCP submission.

IRA compliance resolution system. Rev. Proc. 2026-33, effective May 1, 2027, provides separate guidance to IRA custodians and owners for correcting certain failures related to IRAs that are not available under EPCRS.

Availability of VCAP. The procedure includes reference to the voluntary closing agreement procedures (VCAP) that can be used for resolving certain income and excise tax issues that are not available under EPCRS. When processing a VCP submission, the IRS has the right to resolve the issue under VCAP if it is determined the submission is not eligible for VCP.

IRS considering changes to earnings calculations. The procedure also requests comments by Jan. 20, 2027, on possible changes to the calculation of earnings for certain corrections. Treasury and the IRS are considering an additional safe harbor based on the Department of Labor’s Voluntary Fiduciary Correction Program Online Calculator using the higher underpayment rate under Code section 6621(c)(1). They are also considering whether the applicable DOL Online Calculator rate should serve as a minimum earnings amount for certain corrections. These concepts are proposals, not current EPCRS guidance.