Americans who encounter certain mistakes involving their retirement accounts will have a new way to correct them with the Internal Revenue Service. The IRS and Treasury Department announced two updated procedures Thursday aimed at making it easier to correct errors on workplace retirement plans and individual retirement accounts (IRAs). One of the changes expands an existing correction system used by employers that sponsor retirement plans.
The other establishes a new IRA Compliance Resolution System (ICRS) that will allow IRA owners and custodians to seek corrections for certain mistakes involving the accounts. Bisignano in a statement. Congressional Research Service data show that 30.1 percent of U.S. households had money in IRAs in 2022.
And more broadly, about 54 percent of households held savings in an IRA or an employer-sponsored defined-contribution retirement account, such as a 401(k) or 403(b), that year. There are two separate pieces to the IRS' announcement. On Thursday, Revenue Procedure 2026-34 expanded the Employee Plans Compliance Resolution System, commonly known as EPCRS.
It replaces and restructures the previous procedure that employers used to correct problems with retirement plans. EPCRS covers qualified retirement plans, 403(b) plans, Simplified Employee Pension arrangements and SIMPLE IRA plans. The system includes three avenues for addressing problems: the Self-Correction Program, Voluntary Correction Program and Audit Closing Agreement Program.
The revised procedure also expands changes stemming from the bipartisan SECURE 2.0 Act of 2022, including broader opportunities to self-correct certain "eligible inadvertent failures." In practical terms, this portion of the change primarily concerns employers and retirement plan sponsors correcting mistakes in plans they administer, rather than requiring an individual 401(k) participant to personally navigate the correction system. It establishes the IRA Compliance Resolution System, or ICRS, which the IRS describes as a new correction program modeled on the system already used for employer retirement plans. Under ICRS, IRA custodians and IRA owners will be able to submit certain failures involving tax-favored accounts for correction.
While some of these errors may be due to personal negligence, many are caused by processing errors when money is being transferred between different accounts and institutions.” The revenue procedure identifies categories of failures eligible for correction, including certain required minimum distribution failures, IRA establishment failures, nonspouse beneficiary distribution or rollover failures and 60-day rollover failures. Unlike the workplace-plan change, however, the IRA program isn't effective immediately and will instead start May 1, 2027. One of the largest changes involves the 60-day rollover rule.
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