Fixing Plan Mistakes Just Got Easier: Rev. Proc. 2026-34

If you sponsor a 401(k) or similar plan, its tax benefits are the reason it works for you and your employees. A small slip, such as a missed enrollment, a wrong match or a late amendment, can put those benefits at risk. The good news: the IRS’s new Revenue Procedure 2026-34, effective October 22, 2026, lets you fix many more of these mistakes yourself, with no filing and no fee. The catch is that the protection only holds if you act in time, keep complete records and choose the right correction path. Here’s how to do all three.

Why Your Plan’s Tax-Favored Status Requires Protection

Your retirement plan’s value rests on its “qualified” status under the tax code. That status is what lets you deduct contributions now, lets employees save before taxes, and lets plan investments grow untaxed until retirement.

If an error goes unfixed long enough, the IRS can disqualify the plan, sometimes back to the year the error began. According to the IRS, disqualification hits everyone connected to the plan:

The IRS correction system, called the Employee Plans Compliance Resolution System (EPCRS), exists so sponsors can fix errors and avoid the consequences of disqualification.Rev. Proc. 2026-34 is the newest version of those rules, and it makes the fix easier for most small and mid-size sponsors.

What You Can Now Fix Yourself

The new rules let you self-correct any “eligible inadvertent failure” under the Self-Correction Program (SCP). In plain terms, that’s an honest mistake that happened even though your plan had reasonable compliance procedures in place. Here is how that plays out for the errors sponsors run into most:

One kind of error still can’t be self-corrected: an “egregious” failure. The word doesn’t mean intentional. The IRS uses it for errors so one-sided or so far out of bounds that they look like more than an honest slip, such as a plan that has consistently covered only its highest-paid employees, or contributions for an owner that run several times over the legal limit. Those must go through the IRS’s Voluntary Correction Program (VCP), where you file, pay a user fee and get the IRS’s written approval of the fix. VCP is an IRS program; don’t confuse it with the Department of Labor’s similarly named VFCP, covered below.

Theft and fraud are a separate matter. They aren’t plan errors, and no IRS correction program is built to resolve them. Protecting the plan against dishonest acts is the job of your ERISA fidelity bond.

You Can Outsource the Work, Not the Responsibility

Most small and mid-size sponsors hand day-to-day plan administration to a recordkeeper, a third-party administrator (TPA) and a payroll provider. That’s smart, but it doesn’t move the responsibility off your desk. Under ERISA, choosing and monitoring your plan’s service providers is a fiduciary duty, and the DOL is clear that a sponsor can be liable when a provider fails to do its job. If your TPA miscalculates a match or your payroll system skips a new hire’s deferrals, it remains your duty to catch and correct this type of error.

Monitoring also matters for self-correction itself. Rev. Proc. 2026-34 only allows self-correction when reasonable compliance procedures were in place before the error, and for most sponsors, regular oversight of providers is a core part of those procedures. The DOL’s tips for selecting and monitoring service providers are a good starting point. In practice, monitoring usually looks like this:

• Know who does what. Your service agreements should spell out which tasks each provider handles, and who is responsible for finding and paying for errors they cause.
• Check payroll against deposits. Confirm each pay period that employee deferrals and loan repayments reached the plan on time and in the right amounts.
• Review what providers send you. Read compliance testing results, annual reports and any error notices, and ask questions when something looks off.
• Spot-check the basics. Periodically confirm that new hires were enrolled when eligible, matches follow the plan’s formula and loans follow the plan’s terms.
• Write it down. Keep notes of each review and any follow-up. Those notes help prove your procedures were working if you ever need to self-correct.
• Review providers regularly. Revisit service quality and fees every few years, and replace a provider that keeps making mistakes.

Your Three Jobs: Timing, Records and the Right Program

Self-correction saves you a filing and a fee, but it is not automatic forgiveness. As Kurt Simmons, CPA, founder of KAS Accounting & Wealth Services, LLC, explains in his analysis of the new rules:

“Revenue Procedure 2026-34 gives employers broader self-correction tools, but the protection depends on timing, complete records, and choosing the right correction program.”

Simmons also notes that the rules don’t change what a correction requires. You still have to put the money back, figure in lost earnings, write down what went wrong, and show the IRS your compliance procedures were in place before the mistake happened. Here’s what each of the three jobs looks like in practice.

1. Timing: start the clock when you find the error

A self-correction counts as on time if you finish it by the later of these two dates:

• the last day of the third plan year after the year the error happened, or
• 18 months after you identify the error.

Act before the IRS does. If your plan is selected for an IRS exam before you’ve taken concrete steps to fix a known error, self-correction may no longer be available. A routine annual audit or a general promise to fix problems doesn’t count as a concrete step.

2. Complete records: be ready to prove it

If the IRS ever asks, your records are your proof that the fix was valid. Keep:

• Written plan procedures showing how you handle enrollment, deferrals, matches, loans and amendments, dated before the error
• An error log with the date each mistake was identified, who found it and who was affected
• Correction records showing the amounts restored, how earnings were calculated and when deposits were made
• Updated procedures showing what you changed so the error doesn’t repeat

Your recordkeeper and third-party administrator (TPA) can help, but as the plan sponsor, keeping this file is your responsibility.

3. The right program: match the fix to the problem

Not every error belongs in self-correction. Use this as a starting point, and confirm with your TPA or ERISA counsel:

What Self-Correction Doesn’t Cover

Fixing an error with the IRS protects your plan’s tax status. It doesn’t protect you from everything else that error can set off.

It doesn’t settle things with the Department of Labor. The DOL enforces your duties as a plan fiduciary under ERISA, separately from the IRS. A late deposit of employee paychecks into the plan, for example, can be both a tax problem and a fiduciary breach. The DOL’s own self-correction option is narrow: it covers late deposits with $1,000 or less in lost earnings that are fixed within 180 days, plus some loan errors. Anything beyond that needs a formal VFCP application.

It doesn’t cover theft or fraud. Theft, embezzlement and other dishonest acts aren’t errors, so no IRS correction program addresses them. The DOL requires an ERISA fidelity bond to protect the plan against that loss, generally for at least 10% of plan assets, with a $1,000 minimum and a $500,000 maximum for most plans.

It doesn’t protect you personally. A corrected error can still lead to a participant complaint, a DOL inquiry or a lawsuit claiming you breached your fiduciary duty. The ERISA bond protects the plan, not you. Business owners, plan committee members and other fiduciaries can be held personally liable, and fiduciary liability insurance is what covers their legal defense and related costs.

Putting It Together: Three Layers of Protection

Keeping a retirement plan on solid ground takes three layers of protection, and each one covers a different risk:

1. Careful administration and timely corrections keep your plan’s tax benefits intact. Rev. Proc. 2026-34 makes this layer easier.
2. An ERISA fidelity bond protects the plan’s assets if someone steals from it.
3. Fiduciary liability insurance protects you personally if someone claims you mishandled the plan.

The new IRS rules help with the first layer only. The second and third are where many small and mid-size sponsors are exposed, which raises a question we hear often from plan sponsors:

Do You Need Fiduciary Liability Insurance If You Have an ERISA Bond?

In most cases, yes. Your ERISA bond keeps the plan whole if someone commits fraud or theft, but it doesn’t cover you. Fiduciary liability insurance covers you, including legal defense costs, when someone claims you breached your duties, even over an error you’ve already corrected.

Colonial Surety Company’s ERISA Protection Package combines both, plus cyber coverage, in one online purchase:

• ERISA fidelity bond that meets DOL requirements, issued online instantly, with retroactive coverage available for past years the plan wasn’t sufficiently bonded
• Fiduciary liability insurance that protects business owners with up to $1,000,000 in coverage for defense costs and penalties
• $50,000 in complimentary cyber liability insurance that covers both the retirement plan and your business
• 1-, 2- or 3-year terms, with multi-year packages that lock in your rate and keep your bond compliant as plan assets grow

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Frequently Asked Questions

What is Revenue Procedure 2026-34? It is the IRS’s updated Employee Plans Compliance Resolution System (EPCRS), effective October 22, 2026. It replaces Rev. Proc. 2021-30 and lets retirement plan sponsors fix more errors on their own, with no IRS filing or fee.

Why does my plan’s tax-qualified status matter? It is what makes contributions deductible for your business and tax-deferred for your employees. If a plan is disqualified, employees can owe tax on their savings early, your deductions can be limited, and the plan’s trust pays tax on its earnings.

What retirement plan errors can I self-correct now? Most honest mistakes made while reasonable compliance procedures were in place, including missed enrollments, incorrect matches, late plan amendments and many participant loan errors. Egregious errors still require an IRS VCP filing. Theft and fraud aren’t errors and fall outside these programs.

How long do I have to self-correct a plan error? Until the later of the last day of the third plan year after the error occurred, or 18 months after you identify it. The correction must be finished before the IRS begins an exam unless you had already taken concrete steps to fix it.

What records do I need to self-correct? Written compliance procedures that existed before the error, a log of when the error was found, proof of the amounts and earnings restored, and documentation of what you changed to prevent a repeat.

If my recordkeeper or TPA made the error, is it still my responsibility? Yes. Under ERISA, plan sponsors must prudently select and monitor their service providers. An error a provider makes in your plan is still your plan’s error to correct, though your service agreement may require the provider to cover the cost.

Does self-correcting with the IRS protect me from DOL action or personal liability? No. EPCRS protects the plan’s tax status only. Fiduciary breaches fall under the DOL, an ERISA fidelity bond protects the plan from theft, and fiduciary liability insurance protects you personally.

How much ERISA bond coverage do I need? Generally at least 10% of the plan assets each person handles, with a $1,000 minimum and a $500,000 maximum per plan. Plans that hold employer securities have a $1,000,000 maximum.

Does an ERISA bond cover fiduciary breach claims? No. An ERISA fidelity bond only reimburses the plan for losses from fraud or dishonesty. Claims that a sponsor or fiduciary breached their duties, such as mishandling a plan error, require fiduciary liability insurance.

Can I buy an ERISA bond online? Yes. Colonial Surety Company issues ERISA fidelity bonds online instantly, either on their own or packaged with fiduciary liability and cyber liability insurance, with 1-, 2- or 3-year terms.