Part 7. Rulings and Agreements

Chapter 11. Employee Plans Determination Letter Program

Section 2. EP Case Assignment Guide

7.11.2  EP Case Assignment Guide

Manual Transmittal

April 16, 2013

Purpose

(1) This transmits revised IRM 7.11.2, Employee Plans Determination Letter Program, Case Assignment Guide.

Material Changes

(1) IRM 7.11.2.5, EP Determination Case Grading Criteria was updated to reflect that "Initial cash balance plans without conversion issues" have been downgraded from grade 12 to grade 11.

Effect on Other Documents

IRM 7.11.2 dated July 25, 2012 is superseded.

Audience

TEGE (Employee Plans)

Effective Date

(04-16-2013)

Robert Choi
Director, Employee Plans
Tax Exempt and Government Entities

7.11.2.1  (07-25-2008)
Overview

  1. The EP Case Assignment Guide (CAG) is a classification tool for assigning Determination, Examination, and Voluntary Compliance cases. The CAG establishes a uniform rating system to assist the Group Manager in assigning workload.

  2. The criteria are intended to be consistent with the OPM position classification standards used to classify Tax Law Specialist/Revenue Agent positions. However, since the CAG is only an IRS internal guide, it should not be cited as the basis for any official classification action, and should not be viewed as superseding OPM standards in any way.

  3. The CAG must be broad in its approach to grading and assigning cases; it can not and does not cover all possibilities, or account for unusual or unique elements in a particular case.

7.11.2.2  (07-25-2008)
Case Grading

  1. The procedures for grading Determination, Examination, and Voluntary Compliance cases are described below.

7.11.2.2.1  (07-25-2012)
Determination Cases

  1. When a determination letter application is input into the EP/EO Determination System (EDS) or Tax Exempt Determination System (TEDS), the applicable program will assign a potential case grade to the case by applying the criteria in IRM 7.11.2.5, EP Determination Case Grading Criteria.

  2. The EP Determinations Technical Screener will review the application and will either close the case on merit or designate all or part of the case for review by a specialist.

    1. The EP Determinations Technical Screener and/or Group Manager should adjust the case grade, if necessary, by applying the case grade adjustment factors in IRM 7.11.2.5.1, Case Grade Adjustments.

    2. The determination case grade is also carried over to the TEGE Returns Inventory and Classification System (RICS) to assist in grading Form 5500 returns.

7.11.2.2.2  (07-25-2008)
Examination Cases

  1. The RICS program will assign a potential grade to examination cases by applying the criteria in IRM 7.11.2.6, EP Examination Case Grading Criteria.

  2. The EP classifier and/or Group Manager should adjust the case grade, if necessary, by applying the case grade adjustment factors in IRM 7.11.2.6.1, Case Grade Adjustments.

7.11.2.3  (07-25-2008)
Voluntary Compliance Cases

  1. Voluntary Compliance (VC) cases are requests that are voluntarily submitted to TE/GE on behalf of plan sponsors under various voluntary correction programs, including the Employee Plans Compliance Resolution System (EPCRS), in order to correct one or more failures that have jeopardized the qualified and/or tax-exempt status of the sponsors' plans.

  2. The initial case grade is assigned by the VC Support Function in the Washington DC post-of-duty (POD) by applying the criteria in IRM 7.11.2.7, EP Voluntary Compliance (VC) Case Grading Criteria.

  3. The VC Coordinator and/or the VC Group Manager should adjust the case grade, if necessary, by applying the case grade adjustment factors in IRM 7.11.2.7.1, Case Grade Adjustments.

7.11.2.4  (07-25-2008)
Case Assignment Requirements

  1. Determination, Examination, and VC cases should generally be assigned to a specialist/agent whose grade is commensurate with the grade of the case.

  2. Related plan cases should be assigned to a specialist/agent whose grade level is commensurate with the highest grade of the cases involved.

    • For example, a GS-11 case and a related GS-12 case, should both be assigned to a GS-12 specialist/agent.

  3. Specialists/agents may be assigned cases above their grade level for developmental purposes.

    1. Group Managers are responsible for keeping developmental assignments within the limits stated within the current NORD agreement.

    2. Assignment of developmental cases is governed by local circumstances.

  4. Group Managers may assign a lower-graded case to a higher-graded specialist/agent if the potential impact of the case is significant or to meet operational needs. Such assignments do not raise the case grade.

  5. To the extent that staffing considerations permit, appropriate measures should be taken to avoid consecutive assignment of cases violating either of the following restrictions:

    1. With respect to determination case assignments, the same specialist should not review the same employer's plan more than two times in succession to the extent possible. This should not be construed as meaning that a specialist could not review several plans of an employer at the same time. The use of these measures will minimize the possibility of overlooking errors in plan design.

    2. Any plan that is part of the team audit program (formerly the Coordinated Examination Programs) should be a grade 13 case.

  6. Group Managers will monitor case assignments to ensure proper case rotation.

7.11.2.4.1  (07-25-2008)
Special Rule

  1. The assignment of cases should comply with Policy Statement P-4-5. See IRM 1.2.13.1.3, Servicewide Policies and Authorities, Policy Statements for the Examining Process, Policy Statement 4-5.

7.11.2.5  (04-16-2013)
EP Determination Case Grading Criteria

  1. All factors need not be present to determine the grade of the case. Only one factor must be present to affect the grade of the application.

  2. GS-13: Factors include plans described below for Grade 13 plans.

    1. Multiemployer plans

    2. ESOP arrangements

    3. DB average benefit test (ABT), Demo 5

    4. DB general test (GT), Demo 6

    5. Composition-of-workforce method, Demo 10.

    6. Grandfather rule for employee benefits, Demo 11.

    7. Second-level DB or DC specimen lead plans

    8. Cash balance conversions

    9. Ruling requests involving IRC 401(h)/420

    10. Affiliated service group ruling requests

  3. GS-12: Factors include plans described below for Grade 12 plans without Grade 13 factors.

    1. DB safe harbor plans with permitted disparity (integrated)

    2. DB non-design based safe harbor plans

    3. Multiple employer plans

    4. First-level DB or DC specimen

    5. Separate line of business, Demo 1

    6. Benefits, rights or features, Demo 3

    7. DC average benefit test (ABT), Demo 5

    8. Form 5300 / 5310 DC general test (GT), Demo 6

    9. Pre-participation, imputed service, and past service, Demo 7

    10. DB floor offset, Demo 8

    11. DB plan terminations

    12. Partial termination requests

    13. Target benefit plans

    14. DB collectively bargained

    15. Pooled fund arrangements

    16. IRC 414(n) ruling requests

    17. Governmental and church plans

  4. GS-11: Factors include plans described below for Grade 11 plans without Grade 13 and Grade 12 factors.

    1. DC plans with permitted disparity (integrated)

    2. Form 5307 DC general test (GT), Demo 6

    3. DC collectively bargained

    4. DC plan terminations

    5. Ratio percentage test, aggregating like plans, Demo 4

    6. DB safe-harbor plan without permitted disparity (non-integrated)

    7. DC non-design based safe harbor plan

    8. Compensation definition ruling requests, Demo 9

    9. IRC 414(b), (c) and (n) ruling requests

    10. IRC 401(k) arrangements- traditional or safe harbor

    11. IRC 401(m) arrangements- traditional or safe harbor

    12. SIMPLE plans

    13. All other plans not meeting the criteria for GS-12 or GS-13 specifications

    14. Initial cash balance plans (without conversion issues)

7.11.2.5.1  (07-25-2012)
Case Grade Adjustments

  1. Some factors that may increase the case grade are the discovery of complicating factors, such as:

    • Spin-off terminations and termination/reestablishment

    • Governmental plan at state level, or administered by statute, ordinance or other law absent a unitary plan document

    • Cash balance plan

    • Cross testing

    • Change in type of plan, (e.g., from DC to DB, or from DB to DC)

    • DC ABT/GT with a DB plan in the testing group

    • Leave conversion arrangements

    • International plans

  2. Factors that may decrease the case grade include:

    • Involvement of the field actuary, on-the-job-instructor (OJI), senior agent, or group manager

    • Agent's review does not include complicating issues justifying higher grade

    • Applications for adoptions of pre-approved documents where no coverage and/or nondiscrimination ruling is requested

7.11.2.6  (07-25-2008)
EP Examination Case Grading Criteria

  1. All factors need not be present to determine the grade of the case. Only one factor must be present to affect the grade of the return.

  2. GS-13: Factors include plans described below for Grade 13 plans.

    1. Assets > $25 million and/or participants > 1,000

    2. Multiemployer plan

    3. Leveraged ESOP / TRASOP / KSOP

    4. DB average benefit test

    5. Separate line of business rules

    6. IRC § 403(b) plan except for those listed under GS-12 below

  3. GS-12: Factors include plans described below for Grade 12 plans without Grade 13 factors.

    1. Determination application for the same plan was graded as a GS-12 case

    2. Assets > $5 million and < $25 million and/or participants > 200 and < 1001

    3. DB plan terminations

    4. DB safe harbor plans with permitted disparity

    5. DB collectively bargained plans

    6. Target benefit plans

    7. ESOP / TRASOP / KSOP (not leveraged)

    8. DC plans using the average benefit test

    9. Affiliated service group status

  4. GS-12: Factors include plans described below for Grade 12 403(b) plans without Grade 13 factors.

    1. The 403(b) plan is sponsored by an organization recognized by the IRS as a § 501(c)(3) organization

    2. The sponsor employs fewer than 1,000 employees

    3. There are no related § 457 plan features

    4. The EO sponsor meets the EO case grading criteria for GS-12 (or lower) work as determined by the Director of Exempt Organizations Examinations

  5. GS-11: Factors include plans described below for Grade 11 plans without Grade 13 and Grade 12 factors.

    1. DC plans with permitted disparity, or collectively bargained plan, or termination

    2. Ratio percentage test

    3. DB safe harbor plans without permitted disparity (non-integrated)

    4. IRC 408(k) or (p) plans (SEP or SIMPLE)

    5. All other plans without Grade 12 and 13 factors

  6. Some plan features are not graded (for example, IRC 401(k) or (m)). Their grades determined by the number of participants and/or asset value of the plan.

7.11.2.6.1  (07-25-2008)
Case Grade Adjustments

  1. Some factors that may increase the case grade include failures relating to:

    • Funding and actuarial matters

    • Asset valuation issues (e.g., investments in limited partnerships)

    • Prohibited transactions

    • Unrelated business income

    • Complex IRC 415 issues

    • Nondiscrimination issues (e.g., general test, aggregation, restructuring, and cross testing)

    • Exclusive benefit

  2. Other factors that may increase the case grade include:

    1. Significant complications caused by the IRC 414(b), (c) and (n) rules

    2. Coordination with DOL and/or PBGC

    3. Cases with a high potential for adverse public relations and/or plans sponsored by high profile entities.

  3. Factors that may decrease the case grade include:

    1. Involvement of the field actuary, on-the-job-instructor (OJI), senior agent, or group manager

    2. Complicating issues not found

    3. Case impact is limited, e.g., a 5500-EZ return, or a minor adjustment

    4. Agent's review does not include complicating issues justifying the higher grade. This would include a focused audit in which the specific issues that created the higher level case grade are not considered during the course of the examination.

  4. Some plan features are not graded (for example, IRC 401(k) or (m)). Their grades are determined by the size of the plan.

7.11.2.7  (07-25-2008)
EP Voluntary Compliance (VC) Case Grading Criteria

  1. All factors need not be present to determine the grade of the case. Only one factor must be present to affect the grade of the VC request/submission.

  2. GS-13: Factors include plans described below for Grade 13 plans.

    1. Determination application for the same plan was graded as a GS-13 case

    2. ESOP / TRASOP / KSOP

    3. Cross-tested plans

    4. Cash balance plans

    5. Target benefit plans

    6. Multiemployer plans

    7. Multiple employer plans

    8. Governmental plans under IRC 414(d)

    9. Plans with IRC 401(a)(4), 401(a)(26), and/or 410(b) violations if plan sponsors are members of controlled groups or affiliated service groups (or have adverse employee leasing treatment.)

    10. Plans with IRC 401(a)(4), 401(a)(26), and/or 410(b) violations if plans were affected by corporate mergers/acquisitions

    11. VC requests involving employee leasing or independent contractors

    12. VC requests with a high potential for adverse public relations and/or plans sponsored by high profile entities - includes submissions under the Group Submission Procedures.

    13. VC requests requiring coordination with a Disclosure Officer - cases involving coordination with other governmental agencies (e.g., DOL/PWBA or PBGC), inquiries/complaints from employees or plan participants, etc.

  3. GS-13: Factors include plans described below for Grade 13, for tax-sheltered annuity plans/arrangements under IRC 403(b).

    1. Universities (public or private)

    2. Hospitals

    3. City public schools

    4. University foundations

  4. GS-12: Factors include plans described below for Grade 12 plans for qualified plans under IRC 401(a) without Grade 13 factors.

    1. Determination application for the same plan was graded as a GS-12 case

    2. DC plans using the average benefits test if the failure or correction of the failure would impact the average benefit test

    3. All other plans that involve failures in addition to those described in GS-11 factors

    4. Orphan plans

  5. GS-12: Factors include plans described below for Grade 12 tax-sheltered annuity plans/arrangements under 403(b) without Grade 13 factors.

    1. Small town public schools

    2. Small private schools (Kindergarten through grade 12)

    3. Non-profit organizations

    4. Any other 501(c)(3) organizations that sponsor a 403(b) plan/arrangement

  6. GS-11: Factors include plans described below for Grade 11 plans without Grade 13 and Grade 12 factors.

    1. Qualified plans under IRC 401(a) involving only non-amender failures(s) for TRA '86, UCA, OBRA '93, GUST I, GUSTII, and/or EGTRRA.

    2. Simplified Employee Pensions (SEPs) under IRC 408(k)

    3. SIMPLE IRAs under IRC 408(p)

7.11.2.7.1  (07-25-2008)
Case Grade Adjustments

  1. Factors that may increase the case grade include failure(s) and/or correction methods relating to:

    1. Size of the plan

    2. Actuarial issues in DB plans

    3. Nondiscrimination issues (e.g., general test, aggregation, restructuring, and cross testing)

    4. Complex IRC 415 issues

    5. Exclusive benefit requirements

    6. The number of errors identified or multiple years of the same error

    7. The proposed correction if it is not included in Appendices A and B of the EPCRS Revenue Procedure

    8. The proposed correction seeks to change the terms of the plan to conform to plan operation

    9. Whether the cases will be or has the potential to close through use of a Closing Agreement outside of EPCRS via Delegation Order 97 (DO '97)

    10. The relative sensitivity of the case. This can be affected by public scrutiny, DOL Investigations, potential fraud, and situations deemed abusive by the Service

7.11.2.8  (07-25-2008)
Group Manager Duties

  1. The group manager may adjust the grade level upward or downward. Such changes should be based on factors not otherwise accounted for or accurately evaluated in the EP Case Assignment Guide.

    Note:

    Reasons for changing the case grade upward or downward would include, for example, an expectation that special or complex problems will be encountered; a combination of issues which impact on the complexity of the case; or, the scope of the review is limited.

  2. For a case which cannot be graded using sections 5, 6, or 7 Group Managers should determine which grade level most appropriately matches the case difficulty.

  3. The group manager is responsible for ensuring the final case grade is appropriate based upon all of the facts and circumstances.

    Example:

    Prior to closing a case, the Group Manager may adjust the grade previously assigned to the case upward, because of complicating factors not known initially, or downward, because anticipated complexities were not developed.

  4. Refer to section 4 for more on the group manager's responsibility with respect to case assignment.

7.11.2.8.1  (07-25-2008)
Agent Responsibilities

  1. The EP agent should notify the group manager immediately upon the discovery of a feature/issue which may result in an increase or decrease of the grade level. Until the manager approves the change, the case grade will not be considered changed.


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