Cycle C2 ESOP Determination Letters

Posted by Aaron Juckett, CPA, CPC, QPA, QKA on Mon, Dec 16, 2013
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The Cycle C2 submission deadline for an ESOP Determination Letter is January 31, 2014.  Here is a quick review of the process.

Cycle C2 ESOP Determination Letters

5-Year Remedial Amendment Cycle

IRS Revenue Procedure 2007-44 established a 5-Year Remedial Amendment system of staggered cyclical remedial amendment periods for every individually designed qualified plan. Plan sponsors need to apply only once every five years within their applicable 5-year remedial amendment cycle for an ESOP determination letter. The 5-year remedial amendment cycle is determined by looking at the last digit of the plan sponsor's EIN. Plan sponsors with EINs ending in "3" and "8" are in Cycle C2 and their 5-year remedial amendment cycle generally runs from February 1, 2013 through January 31, 2014.

5-Year Remedial Amendment Cycle

Last Digit of Plan Sponsor's EIN

Initial Submission Period Ends

Next Submission Period Ends

Next Submission Period Ends

A

1 or 6

1/31/2007

1/31/2012

1/31/2017

B

2 or 7

1/31/2008

1/31/2013

1/31/2018

C

3 or 8

1/31/2009

1/31/2014

1/31/2019

D

4 or 9

1/31/2010

1/31/2015

1/31/2020

E

5 or 0

1/31/2011

1/31/2016

1/31/2021

Annual Cumulative List

Plan amendments, restatements, trust agreements, and any other relevant documents must be included in the filing and the IRS considers plan qualification requirements as provided on the applicable Cumulative List.  The applicable Cumulative List is published annually and identifies statutory, regulatory, and guidance changes that must be taken into account in submissions requesting opinion, advisory, and determination letters whose submission period begins on February 1st following issuance of the Cumulative List.  Except as provided on the applicable Cumulative List, the IRS will not consider in its review any:

  • guidance issued or statutes enacted after the October 1 preceding the date the applicable Cumulative List is issued

  • qualification requirements that become effective in a calendar year after the calendar year in which the submission period begins

  • statutes first effective in the year in which the submission period begins where there is no guidance

Cycle C2:  IRS Notice 2012-76 provides the 2012 Cumulative List of Changes in Plan Qualification Requirements to be used for submitting ESOP determination letter applications for plans during the period beginning February 1, 2013 and ending January 31, 2014. 

Cycle D2:  IRS Notice 2013-84 provides the 2013 Cumulative List of Changes in Plan Qualification Requirements to be used for submitting ESOP determination letter applications for plans during the period beginning February 1, 2014 and ending January 31, 2015. 

Prior Cumulative Lists

No Cost ESOP Admin Process Improvement Evaluation

ESOP Cadre

Due to the unique complexities of individually designed ESOP plan documents, the IRS created a group of ESOP specialists that has become known as the ESOP Cadre to review all ESOP determination letter requests. Beginning with Cycle B submissions (January 31, 2008), the IRS began holding approval for ESOP plan documents with certain provisions (i.e. 409(p), rebalancing, reshuffling) and ceased issuing favorable ESOP determination letters while they awaited further guidance.

To help address this issue and the growing backlog resulting from holding applications, the Employee Plans Rulings and Agreements Director began issuing memos on certain ESOP issues in November 2009. While the guidance gives reviewers and the ESOP community a better understanding of the IRS thought process, the memos are not formal technical advice memorandums (TAMs) and do not have not any legal authority.  In June 2010 the IRS reiterated the unofficial nature of the memos while recognizing that the current regulations are old and incomplete.  At that time they said they stated that while they were not formally holding all ESOP determination letter requests, some individual requests were on hold as the determination letter branches waited to obtain guidance on issues such as 409(p), rebalancing, and reshuffling.

They also developed a streamlined Employee Stock Ownership Plan (ESOP) Review Worksheet to assist plan sponsors and practitioners with the maintenance of ESOP plan documents. 

Timing Update

The IRS created a page to check the status of your ESOP determination letter.  I have added a column with a look back to their November 2011 update so you can monitor their progress: 

Form Number

December 2013

Your application has not been assigned if postmarked after this date:

November 2011

Your application has not been assigned if postmarked after this date:

ESOP - Form 5300

Cycle A – All cases assigned

Cycle A - All cases assigned

 

Cycle B – All cases assigned

Cycle B - All cases assigned

 

Cycle C – All cases assigned

Cycle C – September 2008

 

Cycle D – January 2010

Cycle D - No Cases Assigned

 

Cycle E – January 2011

Cycle E - No Cases Assigned

 

Cycle A2 – January 2012

 

 

Cycle B2 – January 2013

 

 

Cycle C2 – February 2013

 

ESOP - Form 5310

August 2013

October 2010

 


Late Submissions

If you have missed your 5-Year Remedial Amendment Submission Deadline the EPCRS (The Employee Plans Compliance Resolution System)  provides a way for plan sponsors to take corrective action to avoid the tax consequences of plan disqualification.  The Voluntary Correction Program (VCP) specifically provides the corrective actions to take if an ESOP plan sponsor misses the deadline.

 

 

Topics: rules and regulations, Employee Stock Ownership Plan (ESOP), Plan Document, ESOP Planning

Aaron Juckett, CPA, CPC, QPA, QKA
Written by Aaron Juckett, CPA, CPC, QPA, QKA

Aaron is President and Founder of ESOP Partners and provides implementation, administration, and consulting services to hundreds of companies. He is a member of The ESOP Association (TEA) and the National Center for Employee Ownership (NCEO).

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