What does the new EPCRS update (Rev. Proc. 26-34) do?

Every retirement plan has mistakes. A new hire is left out of the 401(k) for three pay periods. A match is calculated on the wrong definition of compensation. A top-heavy minimum is missed in a small plan. A loan is granted without spousal consent. For twenty years, the way plan sponsors cleaned those mistakes up has been the Employee Plans Compliance Resolution System — EPCRS — a three-program framework of self-correction, voluntary correction, and correction on audit. On October 22, 2026, the IRS released the first full rewrite of EPCRS since 2021. The EPCRS update in Rev. Proc. 2026-34 pulls three sections of the SECURE 2.0 Act and three interim notices into one document, extends the self-correction window, and changes the economics of several common corrections. Below is what it changes and what a plan sponsor should do before the next correction request.

What is the EPCRS update, and why now? 🗓️

Rev. Proc. 2026-34 is a comprehensive rewrite of EPCRS that supersedes Rev. Proc. 2021-30 and incorporates the SECURE 2.0 Act. The IRS replaced three years of interim guidance with one procedure effective October 22, 2026.

EPCRS is the IRS’s own correction system for sponsors of qualified plans under Code section 401(a), section 403(b) plans, SEP arrangements, and SIMPLE IRA plans. The system is organized into three programs — the Self-Correction Program (SCP), the Voluntary Correction Program with IRS approval (VCP), and the Audit CAP program for correction on examination. The IRS EPCRS overview page describes the framework at a high level; the operating rules live in the revenue procedure.

The last comprehensive revenue procedure in this series was Rev. Proc. 2021-30, issued in 2021. In the intervening four years, Congress passed the SECURE 2.0 Act (Pub. L. 117-328) at the end of 2022, which contained three sections directly affecting EPCRS: section 301 (recovery of retirement plan overpayments), section 305 (expansion of SCP), and section 350 (safe harbor for corrections of employee elective deferral failures). The IRS issued interim guidance on each one — Notice 2023-43 on section 305, Notice 2024-2 on section 350, and Notice 2024-77 on section 301(b). Revenue Procedure 2026-34 now modifies and supersedes all three notices and merges them into the main EPCRS document.

For a plan sponsor, the practical significance is that the three interim notices are no longer the governing text. Any correction completed on or after October 22, 2026 should reference the section numbers in the new revenue procedure, not the notices.

How does the EPCRS update expand the Self-Correction Program? 🛠️

Rev. Proc. 2026-34 adopts the SECURE 2.0 Act section 305 expansion of SCP, which permits self-correction of ‘Eligible Inadvertent Failures’ — including loan failures and most plan document failures — without a favorable letter and without a VCP filing.

The core concept is the Eligible Inadvertent Failure, defined in section 4.09 of the revenue procedure. A failure qualifies if it occurs despite practices and procedures reasonably designed to promote compliance, and if it is not egregious, not a diversion or misuse of plan assets, and not part of an abusive tax-avoidance transaction. Once a failure fits that definition, SCP is open — even for a plan that has no determination letter, and even for several categories that used to require a VCP filing.

The practical opening is wide. The revenue procedure lists what SCP can now reach:

• Loan failures. Participant loan failures can be self-corrected under new section 6.13, including a required protection step: if a loan was granted without spousal consent and has not been repaid at the time of a distribution, the plan sponsor must ensure the spouse receives the benefit the spouse is entitled to under Code sections 401(a)(11) and 417.
• Demographic failures, Employer Eligibility failures, and Plan Document failures. Previously these required VCP. Rev. Proc. 2026-34 opens SCP for most of them under sections 6.05, 6.06, and 6.07.
• SEP arrangements and SIMPLE IRA plans. Self-correction is now expressly available if specified plan-document requirements are met.
• No favorable-letter requirement. The old rule that a qualified or 403(b) plan had to be the subject of a favorable letter to use SCP is eliminated.

What is the new EPCRS update deadline for self-correction? ⏳

A correction is deemed to be within a ‘reasonable period’ if it is completed by the later of (a) the last day of the third plan year following the plan year of the failure, or (b) 18 months after the plan sponsor identified the failure. This is a longer and more forgiving window than Notice 2023-43 provided.

Section 7.05 of the revenue procedure sets the deemed reasonable period for self-correction of an Eligible Inadvertent Failure. Notice 2023-43 originally provided only an 18-month window after identification. In response to public comment, the IRS added the alternative three-plan-year branch, so the sponsor gets the longer of the two. The following table shows how the two branches work for a calendar-year plan that identified a failure in March 2026 for a 2024 plan-year error.

Two cautions. First, the reasonable-period rule is a deeming rule, not a cap — a correction completed after the deadline is tested on all the facts and circumstances, including whether the sponsor was actively pursuing correction. Second, the branch (a) three-plan-year window measures from the year of the failure, not the year of identification. A failure that lies undiscovered for five years cannot be rescued by branch (a) alone.

How does the EPCRS update change plan overpayments? 💰

The revenue procedure folds SECURE 2.0 Act section 301(b) into EPCRS. In most cases, a plan sponsor is not required to seek a corrective payment from a participant for an Inadvertent Benefit Overpayment, and the overpayment can be treated as an eligible rollover distribution.

Code section 414(aa), added by SECURE 2.0 Act section 301(b), generally provides that no corrective payment is required for an Inadvertent Benefit Overpayment. Code section 402(c)(12) provides rollover treatment for those overpayments. Rev. Proc. 2026-34 incorporates the mechanics by:

• Defining Inadvertent Benefit Overpayment in sections 4.01(3)(d) and 4.02(4).
• Excluding failures related to Code sections 401(a)(17), 415, and 436 from the general elimination of the requirement to restore an overpayment to the plan (section 6.12(1)(a)).
• Permitting a plan sponsor to seek recoupment of an Inadvertent Benefit Overpayment, with the recognition that ERISA section 206(h) may limit recoupment in some cases.
• Adding a $250 small-payment exception that was not in Notice 2024-77 — if the Excess Amount is $250 or less, no corrective payment to the plan is required for a section 401(a)(17), 415, or 436 failure, and no notification is required that the amount is not an eligible rollover distribution.
• Treating a transfer of an overpayment that had already been rolled to a second plan as an eligible rollover distribution in both directions, regardless of plan terms.

The practical difference for a plan sponsor is that an overpayment identified today should be analyzed against the new section 6.12 framework, not against the Notice 2024-77 interim rules. The funding exception method and contribution credit method previously described in Notice 2024-77 are no longer spelled out in the revenue procedure — the IRS kept the methods by cross-reference to the earlier Rev. Proc. 2021-30 text (section 6.12(3)(d)), which plan sponsors should expect to be revisited in future guidance.

What tightened under the EPCRS update? 🔒

Three changes narrow the use of SCP: determination-letter failures, Under Examination procedures, and the deadline for the reduced-QNEC deferral safe harbor.

Not every change in the revenue procedure opens up new ground. Several tighten existing practice:

• Determination-letter failures. Section 9.06(2) now limits SCP for failures discovered during the determination letter process to insignificant Operational Failures. Anything else must be handled through VCP or Audit CAP. Plan sponsors preparing a determination letter application should run an internal compliance review first — once filed, the SCP exit is narrower than it used to be.
• Under Examination. Once a plan or plan sponsor is Under Examination, SCP is available only if (a) the plan sponsor can show a specific pre-examination commitment to implement self-correction of the failure, or (b) the failure is an insignificant Operational Failure (sections 7.05, 8.01, 8.02). The specific-commitment test is factual: section 8.01 requires a demonstration that the plan sponsor was actively pursuing correction before the examination.
• Substantiation. Section 7.05(2)(b) now requires a plan sponsor to provide documentation substantiating the self-correction of an Eligible Inadvertent Failure when the plan or sponsor is Under Examination. Contemporaneous records of the identification date, the correction method, the earnings calculation, and the completion date have moved from best practice to a required deliverable.
• Employer Eligibility correction. Section 6.05 treats self-correction of an Employer Eligibility Failure as timely only if the plan sponsor ceases all contributions to the plan as soon as reasonably practicable and no later than the last day of the sixth month after identification. The six-month contribution-cessation deadline is not forgiving.

What should a plan sponsor do before the next correction? ✅

Map existing correction procedures to the new section numbers, re-run any open corrections under the new deadlines, and strengthen the documentation that supports a self-correction under examination.

1. Re-cite your correction policies. Any internal document that still points to Rev. Proc. 2021-30 or Notice 2023-43, 2024-2, or 2024-77 should be updated to Rev. Proc. 2026-34 section numbers. A policy that references superseded guidance will not help in an examination defense.
2. Reopen any correction in flight. For failures identified before October 22, 2026 that have not been corrected, apply the new deemed-reasonable-period rule and the new overpayment framework. The new rules are generally more generous.
3. Rebuild the inadvertent-overpayment analysis. Any pending or past overpayment review that assumed Notice 2024-77 should be re-run under section 6.12. Pay particular attention to whether the failure involves Code sections 401(a)(17), 415, or 436 — those are still restored to the plan.
4. Build the self-correction file. Date of identification, failure description, Code and Appendix citations, correction method, earnings calculation, participant communications, completion date. Store it with the plan records.
5. Run a pre-determination-letter compliance review. If a determination letter application is on the horizon, assume that any failure the IRS identifies in that review will require VCP or Audit CAP, not SCP. The cheapest fix is the one made before filing.
6. Watch for the earnings proposal. Section 2.03(2) requests comments on a proposal to use the DOL Voluntary Fiduciary Correction Program (VFCP) Online Calculator rate (specifically the Code section 6621(c)(1) rate) as a floor for earnings on corrective allocations in defined contribution plans. Comments are due January 20, 2027 — a future amendment could change the economics of earnings corrections.

Frequently asked questions about the EPCRS update ❓

Q. When does the Rev. Proc. 2026-34 EPCRS update take effect?

October 22, 2026. The revenue procedure is generally effective on that date and modifies and supersedes Rev. Proc. 2021-30 together with Notice 2023-43, Notice 2024-77, and section II.I of Notice 2024-2. Plan sponsors should use the new procedure for any correction completed on or after October 22, 2026.

Q. What is an ‘Eligible Inadvertent Failure’ under the EPCRS update?

It is the gateway concept that opens up the expanded Self-Correction Program (SCP). An Eligible Inadvertent Failure is a failure that occurs despite practices and procedures reasonably designed to promote compliance, and that is not egregious, not related to a diversion or misuse of plan assets, and not part of an abusive tax-avoidance transaction. Once a failure meets this definition, SCP is available even if the plan has no favorable determination or opinion letter.

Q. How long does a plan sponsor have to self-correct after the EPCRS update?

A self-correction is deemed to have been completed within a ‘reasonable period’ if it is finished by the later of (a) the last day of the third plan year following the plan year in which the failure occurred, or (b) 18 months after the plan sponsor identified the failure. The revenue procedure extended this window after public comment — Notice 2023-43 had provided only the 18-month branch.

Q. Does the EPCRS update still require a QNEC for missed elective deferrals?

Not in every case. The revenue procedure makes permanent the safe harbor method, now in Code section 414(cc), that allows correction of an employee elective deferral failure in a plan with an automatic enrollment or automatic escalation feature with no qualified nonelective contribution (QNEC) for the missed deferrals. The method is also extended to SEP arrangements, SIMPLE IRA plans, and terminated employees, with specific deadlines for the related matching contributions.

Q. What changed for inadvertent benefit overpayments?

The revenue procedure incorporates SECURE 2.0 Act section 301(b), adding Internal Revenue Code sections 414(aa) and 402(c)(12). In most cases, a plan sponsor is not required to seek a corrective payment from a participant for an Inadvertent Benefit Overpayment, and the overpayment can be treated as an eligible rollover distribution. Failures that relate to Code sections 401(a)(17), 415, or 436 are excluded, but a $250 small-payment exception now applies.

Q. Does SCP still work when the IRS discovers a failure in a determination letter review?

Only in a narrow case. Under section 9.06(2) of the revenue procedure, SCP is available during the determination letter process only for insignificant Operational Failures. All other failures identified in that review must be resolved through VCP or Audit CAP. This is a tightening from prior practice and a reason to run internal compliance reviews before filing a determination letter application.

Q. Can a self-corrector still rely on the correction once the plan is under examination?

Yes, but with new conditions. The plan sponsor must have demonstrated a ‘specific commitment’ to implement self-correction of the Eligible Inadvertent Failure before examination — a facts-and-circumstances test that requires evidence the sponsor is actively pursuing correction — or the failure must be an insignificant Operational Failure. The sponsor must also provide documentation substantiating the self-correction to the IRS examiner.

This article is general information, not tax or legal advice for your plan. EPCRS corrections turn on their facts and depend on the specific plan document and operational history. If your plan has an identified failure or a pending determination letter application, contact SW Accounting & Consulting Corp for a confidential review.