IRS may develop pre-approved program for ESOPs

The IRS Employee Plans (EP) Division may develop a pre-approved plan program for processing employee stock ownership plans (ESOPs), an IRS official said on August 23, 2012. “We’re in discussions with the community for using pre-approved ESOP plans and will see them eventually,” Donald Kieffer, area manager, IRS Employee Plans Determination Letter Program, Mountainside, N.J., said on a webcast sponsored by the American Society of Pension Professionals & Actuaries (ASPPA).

Richard Hochman of McKay Hochman Company, Inc., Butler, N.J., moderated the program. The speakers indicated that they were expressing their own personal views and were not speaking on behalf of their employers.

Kieffer agreed with Hochman that ESOPs are the most backlogged retirement plans being processed at the IRS. He said that, under current rules, all ESOPs must be individually designed. Historically, there have been lots of problems in the processing of ESOPs, according to Kieffer, and a pre-approved program would help cure this. However, before adopting a pre-approved plan program, the IRS will “have to think everything through.” There are barriers to a pre-approved program, he added—the complexity of the issues and the low number of personnel currently available to work cases. Hochman said that a pre-approved plan program could reduce the workload and “speed things up,” and stated that practitioners “can work with” this program.

There should not be a big difference between the IRS’s processing of volume submitter plans and prototype plans, Hochman said. He noted that the latter are divided into standardized and nonstandardized plans and suggested that volume submitter plans could be handled in the same manner as nonstandardized plans. He said there are variations currently, such as requirements involving Form 5307, flexibility and the minimum number of plans that have to be submitted.

Source: American Society of Pension Professionals & Actuaries (ASPPA) webcast.

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For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer’s Benefits Reports.

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