Missed an RMD? The IRS Just Changed the Rules on Fixing It, and the Clock Is Running

Nov 03, 2026
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By: Angela M. Stockbridge

If you sponsor a retirement plan, or you are the TPA or CPA who keeps one running, the IRS has made it easier to fix your mistakes. It has also made it riskier to fix them carelessly.

On October 22, 2026, Treasury and the IRS issued two revenue procedures that change how retirement plan and IRA errors are corrected.1 The updated Employee Plans Compliance Resolution System (EPCRS), Rev. Proc. 2026-34, took effect that same day. A new IRA Compliance Resolution System (ICRS), Rev. Proc. 2026-33, takes effect May 1, 2027.

The timing matters. A missed required minimum distribution (RMD) now carries a 25% excise tax.2 The IRS's years of penalty relief for certain missed beneficiary RMDs ended after 2024.

The new EPCRS replaces Rev. Proc. 2021-30 and folds in the SECURE 2.0 changes the IRS had previously addressed only in interim notices.3 The basic structure is unchanged: self-correction (SCP), voluntary correction with IRS approval (VCP), and Audit CAP. What has changed is who can use each program, when, and with what proof.

The Good News: You Can Fix More on Your Own

Self-correction is now much broader. A plan no longer needs a favorable determination letter to use the Self-Correction Program (SCP).4 Sponsors can now self-correct certain Plan Document, Demographic, and Employer Eligibility Failures, as well as many loan failures.5 The correction window is also wider: a correction is deemed timely if it is finished by the later of the end of the third plan year after the failure or 18 months after the failure was identified.6

The Catch: "Self-Correction" Has to Be Proven

If the IRS examines your plan, you must be able to produce documentation that substantiates the correction.7 That documentation must:

  • Identify the failure, the years affected, the number of employees involved, and the date the failure was found 8
  • Explain how the failure happened and show that reasonable practices and procedures were in place at the time9
  • Substantiate the correction method and the date the correction was completed10
  • Describe the procedure changes made so the failure won't happen again11

A plan document alone does not count as evidence of established procedures.12 Timing also matters once an audit starts. At that point, SCP is generally available only if you had already shown a "specific commitment" to correct the failure, or if the failure is insignificant.13 A general statement of intent to correct problems does not qualify.14

Bottom line: An undocumented fix may not count as a fix at all.

The Longer Deadline Is Not a Safe Harbor From an Audit

The new 3-year/18-month window can create a false sense of security. Once a plan comes Under Examination for a year, the SCP correction period for that year ends, regardless of how much time remained in the window.15 From that point, SCP is available only if (1) the failure is an insignificant Operational Failure, or (2) the sponsor had already shown a specific commitment to correct before the exam began.16 Plan Document, Employer Eligibility, and Demographic Failures, and significant Operational Failures, cannot be self-corrected during an exam without that prior commitment.17

An exam can also begin sooner than many sponsors expect. In a determination letter review, it starts when the agent raises possible failures or asks for information pointing to one the sponsor had not identified.18 The practical lesson is to take concrete, documented steps toward correction as soon as a failure is found, rather than waiting until the end of the window.

Several Years of Small Mistakes? They Are Judged Together

Whether a failure is insignificant depends on the facts and circumstances, and no single factor controls.19 The factors include whether other failures occurred, the dollars involved relative to plan assets and contributions, how many years the failure lasted, how many participants were affected, how quickly it was corrected, and why it happened.20 When Operational Failures occur in more than one year, SCP is available during an exam only if all of the uncorrected failures are insignificant in the aggregate.21

The IRS's own examples are instructive:

  • A section 415 failure affecting 3 of 50 participants was still insignificant when it repeated over two years.22
  • The same type of failure affecting 18 of 50 participants and totaling $150,000 was significant even though it occurred in only one year.23
  • A $278 missed RMD, a $2,500 improper hardship withdrawal, and a $1,000 section 402(g) excess in the same year were insignificant in the aggregate.24

In these examples, the number of people and dollars affected mattered more than the number of years. That is a reading of the examples, not a stated rule, and the examples test only two years of duration. Failures already corrected under SCP or VCP drop out of the aggregate test.25 Fixing one failure promptly can therefore protect the others.

When Self-Correction Isn't Enough

Some problems need an IRS filing under the Voluntary Correction Program (VCP):

  • RMD excise tax relief. For plan RMD failures, the IRS waives the section 4974 excise tax only through VCP or Audit CAP, and the sponsor must affirmatively request the waiver.26 For owner-employees and 10% owners, the request must include a supporting explanation.27
  • Other excise taxes. Relief from the section 4972, 4979, and 72(t) taxes also requires a written request with an explanation.28
  • Failures found in a determination letter review. If the sponsor finds the failure itself, SCP and VCP remain available as applicable. If the IRS agent finds it, SCP is limited to insignificant Operational Failures, and the Audit CAP sanction generally applies instead of the VCP user fee. These can be self-corrected only if they are insignificant Operational Failures.29
  • Excess Amounts in SEP or SIMPLE plans that stay in employees' IRAs. These cannot be self-corrected and carry a sanction of at least 10% of the excess.30

A note on RMDs: an individual can still request a section 4974 waiver on his or her own, at no user fee, under Treas. Reg. § 54.4974-1(g).31 That route addresses only the individual's tax. A VCP filing corrects the plan's failure and resolves the waiver in a single IRS compliance statement that binds the IRS.32

SCP or VCP? A Quick Guide

Situation Likely Path What the Sponsor Gets
Eligible Inadvertent Failure, procedures in place, timely and documented correction SCP Its own documentation, which must hold up if the plan is examined
Plan RMD failure where the participant needs section 4974 relief VCP Compliance statement that includes the waiver
Correction triggers section 4972, 4979, or 72(t) tax VCP Compliance statement; the IRS may decline to pursue the tax
Significant failure found in a determination letter review VCP is not available; Audit CAP sanction applies Closing agreement
SEP/SIMPLE Excess Amount retained in the IRA VCP Compliance statement, plus a sanction of at least 10%
Exam underway, no prior commitment, failure not insignificant Audit CAP Negotiated closing agreement and sanction

 

Multiple Problems? Leaving One Out Costs You

A VCP compliance statement binds the IRS, but only for the failures and years it lists. The IRS will not look for other problems on your behalf.33 If an audit begins, uncorrected failures across multiple years are judged together, and SCP is available only if they are insignificant in the aggregate.34 A single, complete VCP submission can include multiple failures and schedules.35 A sponsor that finds more failures after filing may ask to add them, but the IRS can refuse a late request. If the IRS itself finds a material failure the sponsor did not disclose, the entire plan may be examined under Audit CAP rules.36 Once the compliance statement issues, all of its corrections must be completed within 150 days.37 A complete inventory of failures before filing is worth the effort.

For TPAs and CPAs: Two More Changes to Watch

  • 60-day rollover waivers are leaving the private letter ruling process. During 2027, waiver requests can be made under either ICRS or the PLR procedure. Starting in 2028, the IRS expects them to be available only under ICRS.38 This covers distributions from IRAs, 401(a), 403(a), 403(b), and governmental 457(b) plans.39
  • IRA-level RMD failures caused by a service provider can now be corrected through the IRA Voluntary Correction Program (IVCP).40 CPAs and attorneys are named as possible "Service Providers".41 The user fee is $3,500 for a regular submission filed before 2028.42

Don't Wait for the Audit Letter

The best time to correct a plan failure is before the IRS finds it. Our employee benefits team helps plan sponsors, TPAs, and CPAs:

  • Run a confidential review to find RMD, loan, eligibility, and overpayment failures, and assess whether they are insignificant in the aggregate
  • Document a specific commitment to correct as soon as a failure is found, so SCP remains available if an exam begins
  • Prepare and file VCP and IVCP submissions, including excise tax waiver requests
  • Coordinate group submissions for administrators with affected plans across their client base

Call Angela M. Stockbridge at Falcon Rappaport & Berkman at (214) 420-6142 or email astockbridge@frblaw.com to schedule a consultation before a small error becomes an audit finding.

This post is attorney advertising. It is for general informational purposes only and is not legal or tax advice. Reading it does not create an attorney-client relationship. Prior results do not guarantee a similar outcome.

References

  1. Treasury, IRS update retirement plan correction program and establish correction program for individual retirement accounts | Internal Revenue Service ↩
  2. I.R.C. § 4974(a), (e). The 25% rate and the 10% reduced rate come from the Code; neither revenue procedure states them. ↩
  3. Rev. Proc. 2026-34, §§ 2.01, 2.02(1), 14. ↩
  4. Rev. Proc. 2026-34, § 2.02(1)(a)(ii). ↩
  5. Rev. Proc. 2026-34, §§ 2.02(1)(a)(iv)–(v), 6.05–6.07, 6.13. ↩
  6. Rev. Proc. 2026-34, § 7.05(1)(a). ↩
  7. Rev. Proc. 2026-34, § 7.05(2)(b). ↩
  8. Rev. Proc. 2026-34, § 7.05(2)(b)(1). ↩
  9. Rev. Proc. 2026-34, § 7.05(2)(b)(2). ↩
  10. Rev. Proc. 2026-34, § 7.05(2)(b)(3). ↩
  11. Rev. Proc. 2026-34, § 7.05(2)(b)(4). ↩
  12. Rev. Proc. 2026-34, § 7.02. ↩
  13. Rev. Proc. 2026-34, §§ 7.05(2)(a), 8.01. ↩
  14. Rev. Proc. 2026-34, § 8.01. ↩
  15. Rev. Proc. 2026-34, § 7.05(2)(a). ↩
  16. Rev. Proc. 2026-34, § 8.01. ↩
  17. Rev. Proc. 2026-34, § 8.02. ↩
  18. Rev. Proc. 2026-34, § 4.08(2). ↩
  19. Rev. Proc. 2026-34, § 8.03. ↩
  20. Rev. Proc. 2026-34, § 8.03(a)–(g). ↩
  21. Rev. Proc. 2026-34, § 8.04. ↩
  22. Rev. Proc. 2026-34, § 8.05, Example 2. ↩
  23. Rev. Proc. 2026-34, § 8.05, Example 3. ↩
  24. Rev. Proc. 2026-34, § 8.05, Example 5. ↩
  25. Rev. Proc. 2026-34, § 8.04. ↩
  26. Rev. Proc. 2026-34, § 6.15(2), (2)(a)–(b). ↩
  27. Rev. Proc. 2026-34, § 6.15(2)(a). ↩
  28. Rev. Proc. 2026-34, § 6.15(3), (4), (6). ↩
  29. Rev. Proc. 2026-34, § 9.06(2). ↩
  30. Rev. Proc. 2026-34, §§ 6.17(4)(c), 7.03(4). ↩
  31. Rev. Proc. 2026-33, § 3.03; Treas. Reg. § 54.4974-1(g). ↩
  32. Rev. Proc. 2026-34, §§ 3.02, 6.15(2), 9.09. ↩
  33. Rev. Proc. 2026-34, §§ 9.03, 9.08(1). ↩
  34. Rev. Proc. 2026-34, § 8.04. ↩
  35. Rev. Proc. 2026-34, §§ 10.02(4), 10.04(1). ↩
  36. Rev. Proc. 2026-34, § 9.07(5)(a)–(b). ↩
  37. Rev. Proc. 2026-34, § 9.07(10)(a). ↩
  38. Rev. Proc. 2026-33, § 1.01. ↩
  39. Rev. Proc. 2026-33, §§ 1.01, 2.18. ↩
  40. Missed RMD Penalty 2026: 25% Tax and How to Fix It ↩
  41. Rev. Proc. 2026-33, §§ 2.09, 2.15. ↩
  42. Rev. Proc. 2026-33, § 7.01(1). ↩

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