The New EPCRS Is Here: What Plan Sponsors Need to Know About Revenue Procedure 2026-34

By: Angela M. Stockbridge

Revenue Procedure 2026-34, issued October 22, 2026, replaces Revenue Procedure 2021-30 and expands the Employee Plans Compliance Resolution System (EPCRS). It took effect immediately, so it already governs corrections in progress and any errors found going forward. The key takeaways for sponsors of qualified, 403(b), SEP, and SIMPLE IRA plans are broader self-correction, a new correction deadline, tighter rules once an audit begins, and new overpayment and missed-deferral relief.

Self-Correction Is Now Available for Most "Eligible Inadvertent Failures"

The biggest change is that SCP now permits self-correction of "Eligible Inadvertent Failures," including loan failures. An Eligible Inadvertent Failure is a failure that happens even though the sponsor has practices and procedures that meet the SCP standards. It does not include failures that are egregious, that involve diversion or misuse of plan assets, or that relate to abusive tax avoidance transactions.

In practice, this means:

• No favorable letter required. A qualified plan or 403(b) plan no longer needs a favorable determination or opinion letter to use SCP.
• More types of failures qualify.  Sponsors may self-correct certain plan document failures, demographic failures, and employer eligibility failures.
• Loan failures. Certain participant loan failures can now be self-corrected. If spousal consent was not obtained for a loan that is still unpaid when a distribution is made, the sponsor must make sure the spouse receives the benefit the spouse is entitled to.
• SEPs and SIMPLE IRA plans.  Self-correction is expanded for these arrangements if certain plan document requirements are met.

Some limits still apply. For example, SCP still cannot be used to fix a failure to adopt an initial written plan, or to fix an operational error with a retroactive amendment that is less favorable to participants.

A New "Reasonable Period" Deadline for Self-Correction

Self-correction must now be completed within a reasonable period after the failure is identified. A correction is deemed timely if it is completed by the later of (1) the last day of the third plan year after the plan year in which the failure occurred or (2) 18 months after the failure is identified. This is more generous than the 18-month-only safe harbor in Notice 2023-43, and the IRS changed it in response to comments.

For employer eligibility failures, such as an ineligible employer adopting a 401(k) plan, self-correction is treated as timely if the sponsor stops all contributions as soon as reasonably practicable and no later than the last day of the sixth month after the failure is identified.

Practical point:  Because the deadline can run from the date a failure is identified, sponsors should record when each failure is found, what it is, and who found it.

Self-Correction Gets Harder Once the IRS Is Involved

Once a plan or plan sponsor is under examination, SCP is generally available only if (a) the sponsor has already shown a specific commitment to self-correct, or (b) the failure is an insignificant operational failure. Whether a sponsor has shown a specific commitment depends on all the facts and circumstances and must include proof that the sponsor is actively pursuing correction. If the plan is examined, the sponsor must also provide documentation that supports the self-correction.

The determination letter process is also affected. For failures found during that process, SCP is available only if they are insignificant operational failures.

Inadvertent Benefit Overpayments: Recovery Generally Not Required

Consistent with SECURE 2.0, a plan generally does not have to make a corrective payment for an Inadvertent Benefit Overpayment. Key details for sponsors:

• Exceptions. That relief does not apply to failures under Code sections 401(a)(17), 415, and 436. For those failures, a corrective payment to the plan is required for amounts not recouped, unless the payment is under $250.
• Recoupment and ERISA. Sponsors may still seek recoupment, but ERISA section 206(h) may limit that right.
• Rollover treatment and notices. If the sponsor does not seek recoupment, the overpayment is treated as an eligible rollover distribution. If the sponsor does seek recoupment, it must tell the recipient that any amount not returned is not an eligible rollover distribution.
• Continuing payments. A sponsor that wants to keep making payments that do not match plan terms may adopt an amendment increasing past and future benefits, as long as the amendment does not violate the Code.
• Definition limits. Overpayments t. disqualified persons and owner-employees are not Inadvertent Benefit Overpayments.

Missed Deferral Corrections Are Expanded, With One Rule Removed

The safe harbor that lets plans with automatic enrollment or automatic escalation correct certain employee deferral failures without a QNEC is now permanent. The revenue procedure:

• removes the December 31, 2023 sunset;
• extends the method to SEP arrangements and SIMPLE IRA plans;
• extends it to terminated employees; and
• requires corrective matching contributions within a reasonable period, with the deemed-reasonable window extended from six months to twelve months.

The reduced-QNEC correction for deferral failures now also applies to terminated employees and to after-tax contribution failures. However, the reduced QNEC is available only if correction is completed by the last day of the third plan year after the plan year in which the failure occurred. The IRS also eliminated the special rule for brief exclusions from elective deferrals and after-tax contributions.

Other Changes Worth Noting

• Small Excess Amounts. Sponsors no longer need to notify an individual that an Excess Amount of $250 or less is not an eligible rollover distribution.
• Lost participants.  The procedures for locating lost participants have been revised, including treating the use of a commercial locator service as reasonable.
• Spousal consent failures.  The correction must now ensure that the spouse receives the benefit the spouse is entitled to receive.
• Group VCP submissions. The procedures have been revised, including lowering the threshold from 20 plans to 10.
• Audit CAP sanctions. The sanction for nonamender failures found during the determination letter process has been revised.
• Suspension of benefits notices. There is a new safe harbor correction for defined benefit plans that fail to give certain participants a suspension of benefits notice.
• Fully insured plans. Failures in a fully insured section 412(e)(3) defined benefit plan generally cannot be corrected under SCP, VCP, or Audit CAP.
• VCAP. The IRS may decide that a submission is ineligible for VCP and should be resolved under VCAP instead.

What Comes Next: Earnings Calculations

The IRS is asking for comments on a proposal to change how earnings are calculated for corrections. Under the proposal, sponsors could use the higher section 6621(c)(1) underpayment rate in the DOL Online Calculator as a safe harbor. The proposal would also set the DOL calculator rates as a minimum earnings floor for corrections of operational failures in defined contribution plans. If adopted, this could increase correction costs in some cases, so sponsors should watch this issue. Comments are reportedly due January 20, 2027.

A Companion Program for IRAs

The IRS also issued Revenue Procedure 2026-33, which creates a separate IRA Compliance Resolution System (ICRS). ICRS takes effect May 1, 2027. It is aimed mainly at IRA custodians and owners rather than plan sponsors.

Action Items for Plan Sponsors

1. Review corrections already in progress. Before finishing a self-correction or VCP filing, confirm that the method and timing still work under Revenue Procedure 2026-34. A cheaper option may now be available, or a method you planned to use may no longer be available.
2. Put compliance procedures in writing. Established practices and procedures remain a requirement for self-correction, and a plan document alone is not enough. Sponsors may need written procedures to support a self-correction if the IRS examines the plan.
3. Document every failure and correction. Keep a record of when each failure was identified and how and when it was corrected. If the plan is audited, a sponsor that cannot produce this record may lose the benefit of self-correction.
4. Act early if an audit could be coming. A documented, active commitment to correct before an examination begins may preserve access to SCP.
5. Coordinate with service providers. Confirm that your recordkeeper and TPA are applying the new revenue procedure, not the prior version.
6. Revisit your overpayment policy. Decide whether and when the plan will seek recoupment, considering ERISA section 206(h) and the new notice and rollover rules.

Falcon Rappaport & Berkman's Executive Compensation and Employee Benefits team can help plan sponsors review pending corrections, update compliance procedures, and work through the new rules. Please contact us with any questions.

DISCLAIMER: This summary is not legal advice and does not create any attorney-client relationship. This summary does not provide a definitive legal opinion for any factual situation. Before the firm can provide legal advice or opinion to any person or entity, the specific facts at issue must be reviewed by the firm. Before an attorney-client relationship is formed, the firm must have a signed engagement letter with a client setting forth the Firm’s scope and terms of representation. The information contained herein is based upon the law at the time of publication.