Employers that sponsor retirement plans face significant compliance responsibilities, and mistakes can happen even with careful administration. Common errors include failing to enroll eligible employees, miscalculating employer matching contributions, mishandling participant loan repayments, or overlooking required plan provisions. Left uncorrected, these issues can jeopardize a retirement plan’s tax-favored status and expose an organization to additional costs and administrative burdens.
Fortunately, the IRS provides correction options through its Employee Plans Compliance Resolution System (EPCRS). The agency recently updated the program with the release of Revenue Procedure 2026-34, which incorporates expanded relief provisions under the SECURE 2.0 Act and clarifies several correction requirements.
Three Paths To Relief
Generally, EPCRS is available to employers that sponsor qualified retirement plans, including 401(k)s, 403(b)s, Simplified Employee Pensions (SEPs), and Savings Incentive Match Plans for Employees (SIMPLEs). The system essentially provides three paths for employers:
- Self-correction
- Voluntary correction with IRS approval
- Correction during an IRS examination
Self-correction is especially favorable because employers can resolve qualifying errors without completing an IRS application or paying a program fee. You may still need to fund corrective contributions and associated earnings, however.
Important: EPCRS doesn’t resolve separate ERISA obligations, such as those that may arise from late deposits of employee contributions.
Timely Correction
The recent update incorporates expanded relief under the SECURE 2.0 Act. More specifically, the law addresses “eligible inadvertent failures,” including certain participant loan, plan document, and eligibility errors.
To be clear, much of the applicable relief was already available under SECURE 2.0 and interim IRS guidance. But Rev. Proc. 2026-34 consolidates those rules and makes more changes.
For example, self-correction has long come with conditions. One of them is that corrections must follow applicable methods and be completed within a reasonable period. The guidance modifies and clarifies this period. Generally, correction by the later of 18 months after identifying an error or the end of the third plan year following the error year is deemed timely. Special deadlines can apply, so this isn’t permission to postpone action.
Automatic Enrollment Mistakes
Rev. Proc. 2026-34 also incorporates SECURE 2.0’s permanent, expanded correction safe harbor for certain automatic enrollment, and automatic escalation failures. When its conditions are met, an employer may avoid making a contribution to compensate for employees’ missed deferral opportunities. However, the employer must make up missed matching contributions, adjusted for earnings.
Timing and communication matter. Correct deferrals generally need to begin no later than the first paycheck on or after the end of the 9½-month period following the plan year in which the failure first occurred. An employee’s report can trigger an earlier deadline. Under most circumstances, the employer must provide required notices within 45 days after correct deferrals begin.
Benefit Overpayments
In addition, the update incorporates rules allowing certain inadvertent benefit overpayments to remain unrecovered without jeopardizing a plan’s tax-favored status. Just bear in mind that this relief isn’t universal. Exceptions include overpayments involving certain statutory compensation, benefit, or funding limits.
If your organization finds itself considering recovery, be sure to account for applicable participant protections. Whether repayment is sought can affect rollover treatment and notification obligations. Review the specific facts before requesting money back or deciding that no correction is needed.
Handy Reminder
The general effective date of Rev. Proc. 2026-34 is October 22, 2026. Think of it as a handy reminder to closely monitor your employer-sponsored retirement plan’s compliance — and to address errors promptly through EPCRS as feasible.
If your organization identifies a retirement plan issue, addressing it promptly is only part of maintaining a compliant, well-administered plan. KPM can assist with employee benefit plan audits, third-party administration, plan design, and other benefit plan needs. Contact our team to discuss how we can help.
