IRS creates a correction system for IRAs and a route to waive missed rollover deadlines

The Treasury Department and the Internal Revenue Service created a correction program for individual retirement accounts on October 22, including a process for owners to ask the IRS to waive the 60-day deadline for completing a rollover, according to the IRS announcement. The program takes effect on May 1, 2027.

What happened

The IRS and Treasury issued two revenue procedures on Thursday, October 22 (IR-2026-126). Revenue Procedure 2026-34 expands the system employers use to fix errors in retirement plans and is effective immediately. Revenue Procedure 2026-33 creates the IRA Compliance Resolution System, known as ICRS, which the agency said is "modeled after the procedure for employee plans."

The IRS said the new IRA system, which was provided for in the SECURE 2.0 Act of 2022, "permits IRA custodians and IRA owners to request correction of certain eligible inadvertent failures caused by service-provider errors." The announcement does not list which failures are eligible.

ICRS also covers a rollover problem that can affect individuals directly. The IRS said it "provides a process for retirement plan participants and IRA owners to request to waive the requirement that a rollover to another plan or IRA be made within 60 days of the distribution from the first plan or IRA."

Why it matters

Under the rollover rule, a payment from an IRA or retirement plan paid directly to the owner can be deposited in another IRA or plan within 60 days, the IRS says on its rollover guidance page. The IRS may waive the 60-day requirement "if you missed the deadline because of circumstances beyond your control."

Currently, according to the IRS announcement, such waiver requests "must be submitted as private letter ruling requests." Over the course of 2027 and 2028, the IRS said, these requests will be moved to requests under ICRS. The announcement does not say what ICRS will cost to use or how long a request will take. It states only that the existing automatic waiver and self-certification procedures "remain available, at no cost" for taxpayers who meet the requirements of three earlier revenue procedures, 2020-46, 2016-47 and 2003-16.

The IRS rollover page adds two limits that apply to rollovers between IRAs. A person generally cannot make more than one rollover from the same IRA in a one-year period, and the limit applies across all of a person's IRAs, including SEP and SIMPLE IRAs and both traditional and Roth IRAs. When a retirement plan pays a distribution to the owner rather than transferring it directly, taxes are withheld, so the owner has to use other funds to roll over the full amount within the 60 days, the IRS says.

What to watch

The IRS said it is inviting comments on both programs, and that each revenue procedure "identifies issues on which comments are particularly requested, provides submission instructions, and specifies when comments are due." The announcement does not give the comment dates, which are in the revenue procedures themselves.

ICRS takes effect on May 1, 2027, and the move of waiver requests from private letter rulings to the new system is to run over 2027 and 2028, according to the IRS.