Fixing 401(k), SEP, SIMPLE IRA and IRA Mistakes: IRS Updates EPCRS (Rev. Proc. 2026-34) and Creates the New IRA Correction Program ICRS (Rev. Proc. 2026-33, Effective May 1, 2027)

Bottom line

On October 22, 2026, Treasury and the IRS issued IR-2026-126 with two revenue procedures. Rev. Proc. 2026-34 updates the Employee Plans Compliance Resolution System (EPCRS) for employer retirement plans, supersedes Rev. Proc. 2021-30 and is effective now. Rev. Proc. 2026-33 creates the first correction program for IRAs, the IRA Compliance Resolution System (ICRS), effective May 1, 2027. Two groups are most affected: small business and S Corp owners who sponsor a 401(k), 403(b), SEP or SIMPLE IRA, who get broader self-correction and more time; and IRA owners whose financial institution caused a missed RMD or opened the wrong account type, or who missed a 60-day rollover, who will get a formal way to ask for a fix. A practical step now: review 2026 deferrals, matches and plan loans before the plan year ends on December 31, 2026.

News background

EPCRS is the IRS correction system for employer retirement plans. It has three parts: the Self-Correction Program (SCP), with no IRS filing; the Voluntary Correction Program (VCP), where the sponsor pays a user fee and receives an IRS compliance statement; and the Audit Closing Agreement Program (Audit CAP), used to correct failures found on audit and pay a sanction. It covers qualified plans such as 401(k)s, 403(b) plans, SEP arrangements and SIMPLE IRA plans. The last consolidated version was Rev. Proc. 2021-30.

The SECURE 2.0 Act, enacted December 29, 2022, expanded EPCRS. Section 305 allows self-correction of "Eligible Inadvertent Failures" and directs a correction path for IRA custodians. Section 350 restores a safe harbor for missed deferrals under automatic enrollment, and section 301 addresses inadvertent benefit overpayments. Interim guidance came in Notice 2023-43, Notice 2024-2 and Notice 2024-77; Rev. Proc. 2026-34 now folds that guidance into EPCRS.

Rev. Proc. 2026-33 sets up ICRS under SECURE 2.0 section 305. For now ICRS has one component, the IRA Voluntary Correction Program (IVCP); self-correction of IRA failures is not available yet. IRS CEO Frank J. Bisignano said the procedures "simplify and speed up" corrections of simple errors. Treasury and the IRS request comments on both procedures by January 20, 2027. Sources: IRS IR-2026-126, Rev. Proc. 2026-34, Rev. Proc. 2026-33.

Old vs. new

Governing guidance: Before: Rev. Proc. 2021-30 plus three interim notices. Now: Rev. Proc. 2026-34 replaces them, generally effective October 22, 2026.

Who can self-correct (SCP): Before: a qualified plan or 403(b) plan generally needed an IRS favorable letter to use SCP. Now: that requirement is eliminated; Eligible Inadvertent Failures, including plan loan failures, can generally be self-corrected, and the exceptions are listed in section 7.03.

"Reasonable period" to finish a self-correction: Before: Notice 2023-43 deemed 18 months after identification reasonable. Now: a correction finished by the later of the last day of the third plan year after the plan year of the failure or 18 months after identification is deemed timely.

SEP and SIMPLE IRA plans: Now: self-correction is expanded, but only if the plan document is a valid IRS model (Form 5305-SEP, 5305A-SEP, 5305-SIMPLE or 5304-SIMPLE) or a prototype with a current favorable opinion letter; Excess Amounts left in the IRA cannot be fixed under SCP.

Employer Eligibility Failure (for example, an ineligible employer maintaining a SIMPLE IRA): Now: treated as corrected within a reasonable period if all contributions stop as soon as reasonably practicable and no later than the last day of the sixth month after the failure is identified.

Missed deferrals under automatic enrollment: Before: the safe harbor sunset on December 31, 2023. Now: no sunset; extended to SEP and SIMPLE IRA plans and to terminated employees; a corrective match made by the last day of the 12th month after correct deferrals begin is deemed reasonable (up from six months).

Overpayments: Now: a sponsor may choose not to recoup an inadvertent benefit overpayment, with simpler rules for payments of $250 or less.

After an audit starts: Now: SCP remains available only if the sponsor has shown a specific commitment to self-correct or the failure is an insignificant operational failure, and the sponsor must be able to document the correction.

IRA mistakes: Before: EPCRS did not cover IRAs; a 60-day rollover waiver required self-certification, an automatic waiver or a private letter ruling (PLR). Now: starting May 1, 2027, ICRS/IVCP accepts four failure types: RMD shortfalls caused by a service provider, IRA establishment failures (wrong IRA type or a non-IRA account), nonspouse beneficiary distribution or rollover failures, and 60-day rollover failures.

IVCP user fees (submissions before January 1, 2028): $3,500 for a regular submission. Custodian group submissions are $10,000 for the first 10 IRA owners plus $250 for each additional owner, capped at $50,000. Filing is online only through Pay.gov; Form 15745 is the model compliance statement; paper submissions are not processed.

60-day rollover waivers: In 2027, requests may go through ICRS or a PLR under Rev. Proc. 2027-4; starting in 2028, the IRS anticipates ICRS only. No-cost self-certification (Rev. Proc. 2020-46, 2016-47) and automatic waivers (Rev. Proc. 2003-16) remain available.

Self-check

If you own an S Corp or small business with a 401(k): check 2025 and 2026 for employees who should have been enrolled, deferral elections not implemented, match errors or the wrong definition of compensation. Many of these can now be self-corrected, but keep documentation.

If your company sponsors a SEP or SIMPLE IRA: confirm whether the document is an IRS model form or a prototype with a current opinion letter. If not, or if excess contributions remain in employees' IRAs, SCP is not available and VCP may be the route.

If employees have 401(k) plan loans: check that repayments were withheld on schedule and loan amounts and terms stayed within limits; Rev. Proc. 2026-34 allows self-correction of the loan failures it describes.

If you are an IRA owner whose custodian's error caused a missed RMD, opened the wrong account type, or led you to believe an inherited IRA distribution could be rolled over: keep the emails and statements; after May 1, 2027, IVCP may be an option.

If you took a distribution and missed the 60-day rollover window (for example, hospitalization, postal error or restrictions imposed by a foreign country): first see whether free self-certification fits; if not, weigh a PLR or, after May 1, 2027, an IVCP request.

Simplified example

Simplified illustrations only; they do not predict how the IRS will rule in any case.

Example 1 (employer plan): An 8-employee S Corp sponsors a calendar-year 401(k) with automatic enrollment. Because of a payroll setup error, two employees hired in March 2026 never had deferrals withheld; the company finds this in October 2026. Under the safe harbor in Appendix section .05(8) of Rev. Proc. 2026-34, if correct deferrals begin no later than the first paycheck on or after the end of the 9½-month period after the 2026 plan year (October 15, 2027) and notice goes to the employees within 45 days after correct deferrals begin, no QNEC is required for the missed employee deferrals. The company still makes up the missed match with earnings; if correct deferrals restart in November 2026, a corrective match by November 30, 2027 is deemed reasonable. The company should have established compliance practices and keep correction records.

Example 2 (IRA owner): A 55-year-old IRA owner withdraws $30,000 in 2026 to move it to another institution but is hospitalized and misses the 60-day deadline. Without a waiver, the $30,000 is taxable income, and the 10% additional tax under section 72(t) could add $3,000 unless an exception applies. If a Rev. Proc. 2020-46 reason applies (such as serious illness), the owner can self-certify at no cost and deposit the funds within 30 days after the reason ends. Otherwise, the options are a PLR or, after May 1, 2027, an IVCP request with a $3,500 user fee; the amount deposited cannot exceed the original $30,000.

Action steps and timeline

Now (from October 23, 2026): Rev. Proc. 2026-34 is in effect. Compare 2026 payroll to 401(k), SEP and SIMPLE IRA deferrals, matches and loan repayments; record the date you identify any failure and start a correction file.

December 31, 2026 (Thursday): The 2026 plan year ends for most plans; a good checkpoint for contribution limits, matches and new-hire eligibility.

January 20, 2027 (Wednesday): Comment deadline for both Rev. Proc. 2026-34 and 2026-33, including the IRS proposal to use the higher DOL Online Calculator underpayment rate as an earnings floor.

May 1, 2027 (Saturday): ICRS/IVCP takes effect; IRA owners or custodians can file through Pay.gov.

During 2027: 60-day rollover waivers may be requested under ICRS or by PLR under Rev. Proc. 2027-4.

From January 1, 2028: The IRS anticipates ICRS as the only route for 60-day waivers; IVCP user fees will follow Appendix A of Rev. Proc. 2028-4.

How YCL can help

Retirement plan checkup: compare payroll records to 401(k), SEP and SIMPLE IRA eligibility, deferrals, matches and deposit timing, and deliver a list of failures ranked by risk.

SCP correction file: document each correction as described in section 7.05(2)(b) of Rev. Proc. 2026-34: years affected, employees, identification date, correction method and procedure changes, ready if an examiner asks.

VCP and IVCP filings: prepare the Form 14568 or Form 15745 model statements and narratives and file on your behalf under Form 2848.

60-day rollover and RMD issues: assess whether no-cost self-certification applies and handle Form 1099-R and Form 5329 reporting.

Cross-border clients: coordinate retirement distributions, rollovers and tax filings for Chinese-national employees in the U.S. and new-immigrant families with IRAs.

YCL Accounting & Consulting is a multistate CPA firm serving clients nationwide, in English and Chinese.

FAQ

Q: When is Rev. Proc. 2026-34 effective, and is Rev. Proc. 2021-30 still in force?

A: Rev. Proc. 2026-34 is generally effective October 22, 2026. It modifies and supersedes Rev. Proc. 2021-30, as well as Notice 2023-43, Notice 2024-77 and section II.I of Notice 2024-2.

Q: Can I use ICRS for an IRA mistake today?

A: Not yet. Rev. Proc. 2026-33 is effective May 1, 2027. ICRS currently offers only IVCP, filed online through Pay.gov, and IRA self-correction is not available. Until then, 60-day rollover issues can still use self-certification, automatic waivers or a PLR.

Q: How much does IVCP cost?

A: For submissions filed before January 1, 2028, $3,500 for a regular submission. Custodian group submissions are $10,000 for the first 10 IRA owners plus $250 per additional owner, up to $50,000. Fees for later submissions will be set in Rev. Proc. 2028-4.

Q: Can every SEP or SIMPLE IRA self-correct?

A: No. The plan document must be a valid IRS model form (such as 5305-SEP, 5305-SIMPLE or 5304-SIMPLE) or a prototype with a current favorable opinion letter, and Excess Amounts that would remain in the IRA cannot be corrected under SCP.

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Disclaimer

This article is general tax information only and is not tax, legal, investment or ERISA advice for any person or business. It does not promise any tax result or IRS position. It is based on IRS news release IR-2026-126 (October 22, 2026), Rev. Proc. 2026-34 and Rev. Proc. 2026-33. U.S. Department of Labor rules (such as VFCP) apply separately. IRS guidance may change; consult a licensed tax professional about your situation.