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By Suzanne Blake
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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.
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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.
“Hard working Americans will benefit from these procedures because they simplify and speed up how errors with certain retirement plans and IRAs can get corrected when there is a simple problem,” said IRS Chief Executive Officer Frank J. Bisignano in a statement. “These procedures are part of our effort to make complying with the nation’s tax laws easier and less burdensome for taxpayers.”
Why It Matters
Errors involving retirement accounts can create potentially complicated tax problems both for savers and employers.
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.
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What Is Changing for Retirement Accounts?
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.
“This is another step toward simplifying the retirement planning process, as administrative mistakes can quite often jeopardize the tax advantages of retirement accounts,” Kevin Thompson, the CEO of 9i Capital Group and the host of the 9innings podcast, told Newsweek, adding that the changes could potentially benefit millions of Americans with retirement accounts.
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.
“The process of obtaining a private letter ruling or going back and forth with the IRS to correct certain errors can be cumbersome,” Thompson said. “Expanding the ability to correct qualifying errors without unnecessary administrative hurdles is important.”
IRS Creates New System for IRA Mistakes
Potentially more important for individual retirement savers is Revenue Procedure 2026-33.
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.
“There have been numerous horror stories over the years of Americans facing massive tax bills for errors they didn't cause,” Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek.
“When moving around retirement funds, there are certain rules account holders have to follow, and failure to do so can produce discrepancies on taxes. 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.
What Does This Mean for IRA Rollovers?
One of the largest changes involves the 60-day rollover rule.
Generally, when someone receives an eligible retirement-plan distribution that they intend to roll into another qualifying retirement account, the rollover must be completed within the applicable 60-day period.
The new ICRS will provide a new mechanism for retirement-plan participants and IRA owners to request a waiver of that deadline. Currently, those waiver requests must be made through the IRS' private-letter-ruling process.
“These new rules will make it easier for retirement account holders to submit revisions so that these errors don't leave them with unexpected taxes they ultimately have to pay,” Beene said.
The transition won't happen all at once. During 2027, taxpayers will be able to submit 60-day rollover waiver requests either through ICRS or the existing private-letter-ruling process. The IRS anticipates that beginning in 2028, those requests will be handled through ICRS.
“While this seems to align with the current administration's objective of reducing administrative burdens and cutting red tape, the underlying legislation was passed in 2022,” Thompson said. “The IRS is simply expanding and formalizing the correction procedures, not eliminating the retirement account rules themselves.”
What Happens Next
The updated Employee Plans Compliance Resolution System is already in effect as of Thursday, but Americans will have to wait somewhat longer for the new correction program.
The ICRS becomes effective May 1, 2027, with the transition of 60-day rollover waiver requests continuing through 2027 and 2028.
The Treasury and the IRS are also seeking public comments on both correction programs.
Newsweek’s reporters and editors used Martyn, our AI assistant, to produce this story. Learn more about Martyn here.
Contact Newsweek editors on this story: Jason Lemon and Gray R. Thomas
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