The New EPCRS Is Here and Effective Now

The IRS issued Revenue Procedure 2026-34 on October 22, the first comprehensive update to the Employee Plans Compliance Resolution System (EPCRS) since 2021. It replaces Rev. Proc. 2021-30 and the interim SECURE 2.0 correction guidance in Notices 2023-43 and 2024-77. EPCRS is the IRS program that allows sponsors of 401(k), 403(b), defined benefit, SEP, and SIMPLE IRA plans to fix plan errors and preserve the plan’s tax-favored status. The new revenue procedure finally implements the SECURE 2.0 Act’s expansion of self-correction and makes numerous other changes, some helpful to plan sponsors and some not. It is effective immediately (generally as of October 22, 2026), so plan sponsors will need to evaluate how it applies to corrections already underway and apply the updated EPCRS to any plan errors discovered in the future.

What Changed

The revenue procedure runs to more than 130 pages and we aren’t going to get into the weeds, but highlights include:

• Much broader self-correction, in line with SECURE 2.0. Plan sponsors may now self-correct most “eligible inadvertent failures,” including many plan document failures, failures by an employer that was not eligible to sponsor the plan, coverage and nondiscrimination failures, and participant loan failures (see below). A favorable IRS determination or opinion letter is no longer a prerequisite to self-correct, and SEPs and SIMPLE IRA plans have broader access to self-correction if certain plan document requirements are met. Some failures remain ineligible.
• A new correction timeline. The fixed self-correction deadlines are replaced by a requirement to correct within a “reasonable period” after a failure is identified, with a “deemed reasonable” safe harbor that generally runs through the later of the last day of the third plan year following the plan year in which the failure occurred or 18 months after the failure is identified.
• Stricter rules once the IRS is involved. After a plan comes under IRS examination, self-correction of anything other than insignificant operational errors is generally available only if the sponsor has already demonstrated a specific commitment to correct before the audit begins. The same limit applies to failures the IRS finds while reviewing a determination letter application. Plan sponsors must also be able to produce documentation to an IRS auditor substantiating any self-correction.
• Participant loans. Loans that exceed the dollar limit, carry too long a repayment term or improper amortization, or have gone into default can now be self-corrected, but not after the loan's maximum repayment period has expired. If a loan was made without required spousal consent and the spouse does not consent after the fact, the plan sponsor must ensure the spouse receives the full spousal benefit if the loan is unpaid when benefits are distributed.
• Overpayments. Consistent with SECURE 2.0, plans generally are no longer required to recover inadvertent benefit overpayments, subject to important exceptions and new tax-reporting and participant notice rules.
• Small-dollar relief. A plan sponsor need not recover, or make a corrective payment for, an overpayment of $250 or less caused by a section 401(a)(17), 415, or 436 failure. Plan sponsors also no longer need to notify an individual that an excess amount of $250 or less is not an eligible rollover distribution.
• Missed deferral corrections. Reduced-cost correction methods for missed elective deferrals (including in automatic enrollment plans) are made permanent and expanded to cover SEPs and SIMPLE IRA plans, although the reduced-cost method must be completed by the end of the third plan year after the failure. However, a rule that excused certain brief exclusions from deferrals has been eliminated.
• Changes to IRS filings and audit sanctions. Procedures for Voluntary Correction Program (VCP) filings, group filings by service providers, and the sanction for late plan amendments discovered during a determination letter review have all changed.

Why This Matters

Because the new rules took effect immediately, a correction that was properly designed under the prior guidance may need to be revisited, and in some cases a better (or less expensive) path may now be available. In other cases, a method you planned to rely on may no longer be available. Going forward, self-correction depends heavily on documentation: established practices and procedures (which as a best practice should be documented in writing, although the new EPCRS allows for “formal or informal” procedures), a record of when each failure was identified, and a file showing how and when it was corrected. Plans that cannot produce that record if audited may lose the benefit of self-correction.

A Separate Program for IRAs

Alongside the new EPCRS revenue procedure, the IRS issued Rev. Proc. 2026-33, establishing a new IRA Compliance Resolution System (ICRS) effective May 1, 2027 for certain IRA failures that cannot be resolved under EPCRS. The new ICRS is beyond the scope of this alert.

Action Items

1. Review the new EPCRS before finalizing a correction that is currently in progress. Before completing a self-correction or filing (or responding on) a VCP submission, confirm that the correction method and timing still work under Rev. Proc. 2026-34 and remain the appropriate correction for the error.
2. Record the date any new failure is identified. Correction deadlines can run from identification. Document the date, the failure, the number of participants affected, and who identified it.
3. Confirm your plan has written compliance procedures. Self-correction requires established practices and procedures, and having them in writing is a highly recommended best practice. A plan document alone is not enough. This is not a new requirement, but if your procedures are informal or outdated, now is a great time to update them and put them in writing.
4. Do not assume prior correction approaches still apply. Several familiar correction methods and deadlines changed. Check with counsel before relying on a method used in the past.

The IRS is accepting comments through January 20, 2027, including on a proposal to require a higher interest rate when calculating earnings on corrective contributions, so further changes are possible. We will continue to get to know this new EPCRS. In the meantime, please contact us if you are in the middle of a correction, discover a potential plan error, or have questions about how these changes affect your plans.