New IRS Correction Program Gives IRA Custodians a Formal Path to Fix Account Errors

On October 22, 2026, the Department of the Treasury and the Internal Revenue Service (IRS) issued Revenue Procedure 2026-33, establishing the IRA Compliance Resolution System (ICRS) — the first IRS program dedicated to correcting errors in Individual Retirement Accounts (IRAs). Until now, IRA custodians, including the trustees of IRA trusts, had no formal IRS channel to fix many common administrative errors affecting the accounts they administer; those issues generally had to be resolved through a private letter ruling or — in far too many cases — not at all. ICRS fills that gap and gives custodians and trustees a formal path to remedy such errors. The new program is modeled on the IRS’s long-standing correction system for employer retirement plans. It is effective May 1, 2027, giving custodians a lead-in period to prepare.

At this stage, ICRS consists of a single component: the IRA Voluntary Correction Program (IVCP). IVCP is a paid, IRS-reviewed submission process. The IRS has stated explicitly that self-correction of IRA failures is not currently available, though it has invited comments on expanding the program in the future. An IRA custodian may file an IVCP submission on behalf of an IRA owner (a term that also covers beneficiaries of inherited IRAs), whether for a single affected account or, where a systemic error affects multiple accounts, as part of a group submission. An individual owner may also file on their own behalf.

IVCP currently reaches four categories of errors:

• Required minimum distribution shortfalls caused by a service-provider error. Correction requires distributing the missed amount with earnings.
• IRA establishment failures, where a custodian sets up the wrong type of account, such as a Roth IRA instead of a requested traditional IRA. Correction requires moving the funds into a properly established account and must generally be requested no later than December 31 of the year following the year the account was established.
• Errors caused by custodians or their service providers misdirecting non-spouse beneficiaries into taking a taxable distribution instead of a trustee-to-trustee transfer into an inherited IRA. Correction requires the non-spouse beneficiary to contribute the amount that was distributed, improperly transferred, or improperly rolled over from the original inherited IRA into a new inherited IRA established in the name of the same beneficiary, subject to certain limits.
• Failed 60-day rollovers, regardless of whether the IRA owner or custodian is at fault. The IRS will consider granting a waiver of the 60-day rollover deadline where equity and good conscience support it, such as in cases of death, disability, hospitalization, incarceration, or custodian error. This category is particularly significant for custodians and their clients because it is designed to largely replace the private letter ruling process currently used to request such waivers. The applicant for this type of submission must be the IRA owner. A custodian cannot file as the applicant, although it has a strong interest in advising clients on this relief and may wish to offer assistance with the submission as a client service.

For 2027, IRA owners may use either the traditional private letter ruling process or ICRS; beginning in 2028, ICRS will become the exclusive avenue for this relief. The existing no-cost automatic waiver and self-certification procedures are unaffected and remain available. Where relief is appropriate, the IRS may also agree, within an IVCP submission, not to pursue related excise taxes on excess contributions or missed required minimum distributions, or the 10% additional tax on early distributions.

All IVCP submissions must be filed electronically, cannot be made anonymously, and carry a user fee: $3,500 for a standard submission filed before January 1, 2028, or, for a group submission affecting at least 10 IRA owners, an initial fee of $10,000 for the first 10 owners plus $250 for each additional affected owner, up to a maximum of $50,000 for 170 or more IRA owners. The program is generally unavailable once an IRA owner’s tax return is under examination, and a correction cannot generate a refund for a tax year that is already closed under the applicable statute of limitations.

IVCP is a meaningful new compliance tool for IRA custodians, and it is worth building into their error-remediation playbooks well ahead of the May 2027 effective date. Custodians with questions about ICRS or seeking assistance incorporating it into their IRA administration and error-correction procedures are encouraged to contact a member of the Bradley Employee Benefits & Executive Compensation Practice team.