Rev. Proc. 2026-34, October 22, 2026

Executive Summary and Regulatory Scope

The Internal Revenue Service (IRS) issued Revenue Procedure 2026-34 to establish an updated, consolidated statement of the Employee Plans Compliance Resolution System (EPCRS). Operating under the authority of the Department of the Treasury, EPCRS governs the statutory and administrative mechanisms by which Plan Sponsors of retirement plans intended to satisfy Internal Revenue Code (Code) §§ 401(a), 403(a), 403(b), 408(k) (Simplified Employee Pensions, or SEPs), and 408(p) (SIMPLE IRA Plans) can remediate operational, plan document, demographic, and employer eligibility failures without incurring plan disqualification or loss of tax-favored status.

Revenue Procedure 2026-34 formally supersedes Revenue Procedure 2021-30, 2021-31 I.R.B. 172, while also modifying and superseding prior interim administrative guidance issued under Notice 2023-43, Notice 2024-2 (Section II.I), and Notice 2024-77. The procedure continues the historical tripartite structure of EPCRS, comprising the Self-Correction Program (SCP), the Voluntary Correction Program (VCP), and the Audit Closing Agreement Program (Audit CAP). However, Rev. Proc. 2026-34 fundamentally expands the scope and availability of self-correction, alters long-standing rules regarding benefit overpayment recoupments, and provides permanent statutory safe harbors for elective deferral errors.

Facts and Regulatory Architecture of Revenue Procedure 2026-34

Revenue Procedure 2026-34 applies to qualified retirement plans under Code § 401(a), annuity plans under § 403(a), tax-sheltered annuity plans under § 403(b), SEP arrangements under § 408(k), and SIMPLE IRA plans under § 408(p). The fundamental purpose of the procedure, as stated by the Service in Section 1.01, is to maintain a comprehensive correction regime:

“This revenue procedure updates the comprehensive system of correction programs for sponsors of retirement plans that are intended to satisfy the requirements of section 401(a), 403(a), 403(b), 408(k), or 408(p) of the Internal Revenue Code (‘Code’) but that have not met these requirements for a period of time. This system, the Employee Plans Compliance Resolution System (‘EPCRS’), permits Plan Sponsors to correct these failures and thereby continue to provide their employees with retirement benefits on a tax-favored basis.”

The operational framework of EPCRS rests upon key general principles articulated in Section 1.02 of the procedure:

“Plan Sponsors and other administrators of eligible plans should satisfy the applicable plan document requirements of the Code and operate the plans in accordance with their terms.
Plan Sponsors and other administrators of eligible plans should be encouraged to establish administrative practices and procedures that ensure that these plans are operated properly in accordance with the applicable requirements of the Code and the terms of the plan document.
Plan Sponsors and other administrators should make voluntary and timely correction of any plan failures, whether involving discrimination in favor of highly compensated employees, plan operations, the terms of the plan document, or adoption of a plan by an ineligible employer.”

Rev. Proc. 2026-34 delineates the three core components of EPCRS in Section 1.03:

Self-Correction Program (SCP): Allows a Plan Sponsor that has established compliance practices and procedures to correct certain plan failures without paying any user fee or sanction, as detailed in Part IV (Sections 7 and 8).
Voluntary Correction Program (VCP): Permits a Plan Sponsor, at any time prior to being Under Examination, to submit an application via Pay.gov, pay a limited user fee, and obtain IRS approval and a binding compliance statement for identified failures, as set forth in Part V (Sections 9 and 10).
Audit Closing Agreement Program (Audit CAP): Applies when a failure (not resolved via SCP or VCP) is identified while the plan or Plan Sponsor is Under Examination. The failure must be corrected, administrative procedures updated if necessary, and a negotiated sanction paid pursuant to a closing agreement, as detailed in Part VI (Sections 12 and 13).

Additionally, Section 1.04 references the Employee Plans Voluntary Closing Agreements (VCAP) process under Rev. Proc. 2026-4 for resolving certain income or excise tax issues ineligible under EPCRS, while Section 1.05 notes the establishment of a separate IRA compliance resolution system under Rev. Proc. 2026-33 for IRA custodians and owners.

Legislative Mandate and Administrative Rationale for Issuance

The primary catalyst for the issuance of Revenue Procedure 2026-34 was the enactment of Division T of the Consolidated Appropriations Act, 2023, Public Law 117-328 (136 Stat. 4459), commonly known as the SECURE 2.0 Act of 2022 (SECURE 2.0). SECURE 2.0 enacted sweeping statutory mandates designed to reduce administrative burdens on plan sponsors, eliminate harsh penalties for unintentional administrative errors, and expand voluntary compliance options. Specifically, Sections 301, 305, and 350 of SECURE 2.0 altered core statutory provisions of the Internal Revenue Code that directly conflicted with or expanded upon the provisions of Rev. Proc. 2021-30.

As explained by the Treasury Department and the IRS in Section 2.02:

“This update to Rev. Proc. 2021-30 incorporates changes made to EPCRS by recent legislation and interim guidance issued in Notice 2023-43, 2023-24 IRB 919, Notice 2024-2, 2024-2 IRB 316, and Notice 2024-77, 2024-45 IRB 1093... Division T of the Consolidated Appropriations Act, 2023, Pub. L. 117-328, 136 Stat. 4459 (2022), known as the SECURE 2.0 Act of 2022 (‘SECURE 2.0 Act’), was enacted on December 29, 2022. Section 301 (recovery of retirement plan overpayments), section 305 (expansion of the Employee Plans Compliance Resolution System), and section 350 (safe harbor for corrections of employee elective deferral failures) of the SECURE 2.0 Act made changes that affected several provisions of Rev. Proc. 2021-30.”

In addition to implementing statutory mandates, the IRS issued Rev. Proc. 2026-34 to address public comments from practitioners, resolve ambiguities in interim notices, align plan document definitions with updated determination and opinion letter procedures under Rev. Proc. 2022-40 and Rev. Proc. 2023-37, and consolidate the correction appendices into a unified structure.

Expansion of Self-Correction Program to Eligible Inadvertent Failures

The most significant structural shift from Rev. Proc. 2021-30 to Rev. Proc. 2026-34 lies in the expansion of the Self-Correction Program pursuant to SECURE 2.0 § 305.

Under Rev. Proc. 2021-30, SCP was strictly circumscribed. Operational Failures were bifurcated into “insignificant” (correctible at any time) and “significant” (correctible only within a fixed three-year correction period following the plan year of the failure, per Rev. Proc. 2021-30 § 9.02). Plan Document Failures could only be corrected under SCP if the plan had a Favorable Letter and the correction occurred within the three-year significant failure period. Demographic Failures and Employer Eligibility Failures were categorically ineligible for SCP under Rev. Proc. 2021-30 §§ 4.01(1)(d) and 4.06.

Rev. Proc. 2026-34 replaces this rigid structure by introducing the statutory term “Eligible Inadvertent Failure” in Section 4.09:

“The term ‘Eligible Inadvertent Failure’ means a Qualification Failure, Section 403(b) Failure, SEP Arrangement Failure, or SIMPLE IRA Plan Failure that occurs despite the existence of practices and procedures that satisfy the standards set forth in section 7.02. An Eligible Inadvertent Failure does not include any failure that is egregious, relates to the diversion or misuse of plan assets, or is directly or indirectly related to an abusive tax avoidance transaction.”

Key modifications to SCP implemented in Rev. Proc. 2026-34 § 2.02(1)(a) include:

Elimination of Favorable Letter Requirement: Plan Sponsors are no longer required to hold a favorable determination, opinion, or advisory letter to utilize SCP for Qualified Plans or § 403(b) Plans (Section 2.02(1)(a)(ii)).
Expansion of Eligible Failures: SCP is expanded to cover Plan Document Failures (Section 6.07), Employer Eligibility Failures (Section 6.05), Demographic Failures (Section 6.06), and Plan Loan Failures (Section 6.13).
Self-Correction Period Standard: Section 7.05(1) establishes that self-correction of an Eligible Inadvertent Failure must be completed within a “reasonable period” after identification. Under Section 7.05(1)(a) and footnote 1, a correction completed by the later of the last day of the third plan year following the plan year in which the failure occurred or 18 months after identification is deemed to be completed within a reasonable period.
Special Rule for Employer Eligibility Failures: Self-correction of an Employer Eligibility Failure is deemed completed within a reasonable period if the Plan Sponsor ceases all contributions as soon as reasonably practicable, but no later than the last day of the sixth month following the date the failure is identified (Sections 6.05 and 7.05(1)(c)).
Specific Commitment Standard Under Examination: Under Section 8.01, if a plan or Plan Sponsor comes Under Examination, SCP remains available only if the failure is an insignificant Operational Failure OR if the Plan Sponsor demonstrated a “specific commitment to implement a correction” prior to being notified of the examination. As noted in Section 8.01:

“Whether actions taken by a Plan Sponsor demonstrate a specific commitment to implement a correction is based on facts and circumstances. However, these actions must generally demonstrate that the Plan Sponsor is actively pursuing correction of the identified Eligible Inadvertent Failure. The completion of an annual audit or adoption of a general statement of intent to correct failures when they are discovered are not actions demonstrating a specific commitment...”

Statutory Framework for Inadvertent Benefit Overpayments and Recoupment

Revenue Procedure 2026-34 fundamentally overhauls the correction principles governing plan overpayments by incorporating SECURE 2.0 § 301(b), which added Code §§ 414(aa) and 402(c)(12).

Under Rev. Proc. 2021-30 § 6.06(3), when a defined benefit plan made an overpayment, the Plan Sponsor was generally obligated to seek recoupment from the participant or make corrective payments to restore the overpayment amount to the plan (subject to limited exceptions such as the funding exception method or contribution credit method). Furthermore, overpayments were treated as non-eligible rollover distributions, requiring statutory tax notices to recipients.

Rev. Proc. 2026-34 § 4.01(3)(d) defines an “Inadvertent Benefit Overpayment” as an overpayment that occurs due to an Eligible Inadvertent Failure (excluding payments to disqualified persons under Code § 4975(e)(2)). Under the revised rules in Section 6.12:

Elimination of Recoupment and Restoration Mandate: Pursuant to Code § 414(aa) and Rev. Proc. 2026-34 § 6.12(1)(a), a Plan Sponsor is generally not required to seek recoupment of an Inadvertent Benefit Overpayment from the recipient, nor is the Plan Sponsor required to make a corrective contribution to make the plan whole.
Exceptions Requiring Corrective Payments: Corrective payments to the plan remain mandatory if the overpayment results from a failure to satisfy statutory limits under Code §§ 401(a)(17), 415, or 436, or if the overpayment was made to a disqualified person (Section 6.12(1)(a)-(b)). A small payment exception applies if the unrecouped statutory overpayment is $250 or less (Sections 6.03(4) and 6.12(1)(b)).
Rollover Relief Under Code § 402(c)(12): Under Section 6.12(1)(c)(i), if the Plan Sponsor does not seek recoupment of an Inadvertent Benefit Overpayment, the distribution is treated as an eligible rollover distribution. If the Plan Sponsor does seek recoupment, any unreturned portion is not treated as an eligible rollover distribution, and written notice must be provided to the recipient.
Plan Amendment to Conform Terms: A Plan Sponsor wishing to continue overpayments in the future may retroactively amend the plan to increase past and future benefit payments to conform to plan operations, provided the amendment complies with Code § 401(a)(4) and does not violate statutory limits under §§ 401(a)(17) or 415 (Section 6.12(1)(a) and (3)(a)).

Permanent Safe Harbor for Automatic Contribution and Deferral Errors

Section 350 of the SECURE 2.0 Act added Code § 414(cc), establishing a permanent statutory safe harbor for correcting employee elective deferral failures in plans with automatic contribution features (automatic enrollment or automatic escalation). Revenue Procedure 2026-34 codifies these rules in Appendix Section .05(8).

Under Rev. Proc. 2021-30 Appendix A § .05(8)(d), the administrative safe harbor allowing correction of missed deferrals under automatic contribution features without a Qualified Nonelective Contribution (QNEC) was subject to a temporary sunset date of December 31, 2023.

Rev. Proc. 2026-34 Appendix Section .05(8) incorporates Code § 414(cc) and Notice 2024-2 by making the following modifications:

Permanent Elimination of Sunset: The December 31, 2023 sunset date is permanently eliminated (Section 2.02(1)(b)(i)).
Expansion to Other Plan Types: The safe harbor is extended to SEP Arrangements and SIMPLE IRA Plans, in addition to Code § 401(k) and § 403(b) Plans (Section 2.02(1)(b)(ii)).
Extension to Terminated Employees: The correction method is made available for affected employees who have terminated employment prior to correction (Section 2.02(1)(b)(iii)).
Correction Deadline and Notice: No QNEC for missed elective deferrals is required if correct deferrals commence (or would have commenced) by the end of the 9½-month period following the end of the plan year of the failure, written notice is provided within 45 calendar days of correct deferrals commencing, and corrective allocations of missed matching contributions (adjusted for earnings) are made within a reasonable period (Section .05(8)(a)). Under Section .05(8)(a) and footnote 4, a corrective allocation of matching contributions made by the last day of the twelfth month following the month correct deferrals begin is deemed made within a reasonable period.

Procedural Modifications Across Voluntary Correction and Audit Programs

Revenue Procedure 2026-34 introduces several notable procedural changes affecting VCP and Audit CAP:

Group Submissions Threshold: Section 9.11(1) reduces the minimum number of affected plans required for an Eligible Organization to file a VCP group submission from 20 plans (under Rev. Proc. 2021-30 § 10.11(1)) to 10 plans.
Audit CAP Nonamender Sanction Standardization: Section 13.04(1) replaces the tiered sanction structure (150% or 250% of VCP fee) under Rev. Proc. 2021-30 § 14.04 with a standardized sanction equal to 200% of the applicable VCP user fee for Nonamender Failures discovered by the IRS during the determination letter application process.
Reorganization of Appendices: The separate Appendix A (Operational Failures) and Appendix B (Correction Methods and Examples) from Rev. Proc. 2021-30 are merged into a single consolidated Appendix in Rev. Proc. 2026-34, eliminating duplicative provisions and updating financial examples.
Earnings Calculation Floor Proposal: In Section 2.02(3), the Treasury Department and IRS request public comments on a proposal to establish a safe harbor earnings calculation using the IRC § 6621(c)(1) underpayment rate via the Department of Labor Online Calculator, or imposing that rate as a floor for all defined contribution plan earnings adjustments.

Prepared with assistance from Gemini Notebook.