IRS Creates New Correction Program for IRAs

Implementing a SECURE 2.0 Act requirement, the Internal Revenue Service (IRS) recently issued Revenue Procedure 2026-33 (IRA Correction Procedure), which establishes the IRA Compliance Resolution System, a process through which individual retirement account and annuity (IRA) custodians and owners can request IRS approval to correct certain failures.

The IRA Correction Procedure is modeled on the correction program for tax-qualified plans, which the IRS simultaneously updated in Revenue Procedure 2026-34. Unlike the tax-qualified plan program, however, the IRA Correction Procedure does not currently permit self-correction. Corrections under the IRA Correction Procedure requires a filing with the IRS and a user fee, making the IRA Correction Procedure less attractive than a self-correction program would be. The IRS has indicated it may expand the program to cover additional failures.

The IRA Correction Procedure focuses on four fairly common errors.

1. Missed 60-day rollover deadline. Previously, relief often required a cumbersome and expensive private letter ruling request. The program covers the missed deadline in rollovers from employer plans as well as from IRAs. The IRS will now consider a list of factors in deciding whether to excuse a late rollover, including financial institution errors, disability or hospitalization, death, postal errors, and how much time has passed. These requests must be made by the individual (or a representative), not a custodian. The existing no-cost automatic waivers and self-certification procedures remain available.
2. Insufficient required minimum distribution (RMD) caused by a provider’s failure. If the IRS approves the correction, the distribution is reported as taxable income in the year of correction. The individual may also request a waiver of the excise tax, which can be as high as 25%, and the primary concern when an RMD is missed.
3. Establishment of the wrong type of IRA. The IRA owner has requested a provider to set up one type of IRA but the provider sets up a different IRA or a non-IRA account. A submission for this failure must be made as soon as practicable and no later than December 31 of the year after the account was established.
4. Mistaken advice to a nonspouse beneficiary. A provider error leads a nonspouse beneficiary to incorrectly believe that a distribution from a decedent’s or inherited IRA can be rolled over, and the beneficiary instead receives a taxable distribution or a taxable transfer to a non-inherited account.

For the RMD and wrong-type-of-IRA failures, the provider must show that it had established practices and procedures that were routinely followed and that the failure resulted from an oversight or mistake in applying them. The relevant provider can be a custodian or another service provider which meets certain requirements, such as a financial planner, accountant, or attorney. Custodians and other providers will want to confirm that they have established (and ideally documented) procedures for IRAs, that employees who work with IRAs are trained to follow and document these procedures, and that the procedures are routinely followed and updated.

The IRA Correction Procedure is effective May 1, 2027. Among other requirements, the IRA owner must be current on income tax filings, and, as is often the case with IRS correction programs, relief is generally unavailable if the owner’s return is under IRS examination. Taxpayers seeking relief for a missed 60-day rollover may use either the new process or a private letter ruling request through the end of 2027. Custodians may file a group submission when a systemic error has affected at least 10 IRA owners and at least 10 IRAs are corrected. For group submissions, the custodian must notify owners at least 45 days before filing, and only owners who agree to be included may be covered.

IRA custodians and other IRA providers should review these rules and their compliance issues now and confirm or establish policies to so that any failure meets the criteria to apply for relief. The IRS is accepting comments through January 20, 2027, including on additional failures the program should cover.

For more information, please contact a member of our Compensation & Benefits practice.

© Arnold & Porter Kaye Scholer LLP 2026 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.