Tax Cowboy Posted May 28, 2019 Share Posted May 28, 2019 Group, For many years now I've been under the impression that there is no requirement for a plan sponsor to apply with the IRS for an ESOP determination letter. Rather, my understanding has been that many TPA's are volume submitters. And in the few TEGE audits I've been involved with, the auditors have all accepted the ESOP AA and Plan documents provided without a determination letter. Is there a code cite/Dept of labor rule that requires an ESOP plan sponsor to apply for a determination letter? Thoughts and comments appreciated. Best, Joe Dadich, Esq. Link to comment Share on other sites More sharing options...
Luke Bailey Posted May 29, 2019 Share Posted May 29, 2019 If you have a preapproved plan that has an IRS "opinion letter," and you are a word-for-word adopter of that preapproved plan, including choosing among permissible options in the adoption agreement, then you have the equivalent of an IRS determination letter. The IRS calls it "reliance" on the opinion letter. So get a copy of the opinion letter from the "sponsor." If it turns out you don't have a preapproved plan with a current opinion letter, even though it was in the form of a BPD and an AA, so that in actuality it is an individually designed plan, or even if it is a preapproved plan, but you added provisions that were not approved by IRS, then you are at a disadvantage without the individual DL. The plan might or might not be qualified depending on its provisions, and in any event without either a DL or an opinion letter, the sun is at the EP agent's back, not yours. Of course the above is only regarding the qualification in form of the plan document. The plan must also comply in operation, which is a whole other subject. Luke Bailey Senior Counsel Clark Hill PLC 214-651-4572 (O) | LBailey@clarkhill.com 2600 Dallas Parkway Suite 600 Frisco, TX 75034 Link to comment Share on other sites More sharing options...
G8Rs Posted May 29, 2019 Share Posted May 29, 2019 As Luke pointed out, there is no requirement that a plan have a determination letter or reliance on a pre-approved plan. If it's a leveraged ESOP, then the lendor might require IRS approval. Regardless, it's standard practice to get IRS approval. Also note that there are no pre-approved ESOPs yet. Those were only recently allowed - submisstions were made by 12/31/18 and we don't know how long it will take for the IRS to approve them. Best guess is in 2020 based on some informal comments from the IRS. Luke Bailey 1 Link to comment Share on other sites More sharing options...
Tax Cowboy Posted May 29, 2019 Author Share Posted May 29, 2019 Very good points!! Thank you. G8Rs, you mentioned that only recently has the IRS allowed submissions made by 12/31/18. Is there a regulation cite? or is new regulation buried deep in 2017 new tax law? Link to comment Share on other sites More sharing options...
ESOP Guy Posted May 29, 2019 Share Posted May 29, 2019 17 minutes ago, Tax Cowboy said: Very good points!! Thank you. G8Rs, you mentioned that only recently has the IRS allowed submissions made by 12/31/18. Is there a regulation cite? or is new regulation buried deep in 2017 new tax law? See this IRS announcement. Link to comment Share on other sites More sharing options...
Mike Preston Posted June 3, 2019 Share Posted June 3, 2019 On 5/29/2019 at 7:02 AM, ESOP Guy said: See this IRS announcement. The announcement didn't come through, or it has been deleted. Link to comment Share on other sites More sharing options...
ESOP Guy Posted June 3, 2019 Share Posted June 3, 2019 11 hours ago, Mike Preston said: The announcement didn't come through, or it has been deleted. The missing link to IRS website. https://www.irs.gov/retirement-plans/pre-approved-plan-program-expanded-to-include-cash-balance-plans-and-esops Link to comment Share on other sites More sharing options...
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