7.11.2 EP Case Assignment Guide

Manual Transmittal

October 15, 2018

Purpose

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

Material Changes

(1) Updated the IRM to meet the requirements of P.L. 111-274 (H.R. 946), the Plain Writing Act of 2010.

(2) Updated and renamed IRM 7.11.2.1, Overview, to Program Scope and Objectives. Also added IRM 7.11.2.1.1, Background, IRM 7.11.2.1.2, Acronyms, as required by IRM 1.11.2.2.5.

(3) Updated IRM 7.11.2.2.1, Determination Cases, to remove reference to the EP Determinations Technical Screener because cases are assigned directly to agents.

(4) Updated IRM 7.11.2.5, EP Determination Case Grading Criteria, to reflect that initial cash balance plans without conversion issues are upgraded from a grade 11 to a grade 12 case.

Effect on Other Documents

IRM 7.11.2 dated March 7, 2014 is superseded.

Audience

Tax Exempt and Government Entities
Employee Plans Personnel

Effective Date

(10-15-2018)

Catherine L. Jones
Acting Director, Employee Plans
Tax Exempt and Government Entities

Program Scope and Objectives

  1. Purpose: The Employee Plans (EP) Case Assignment Guide (CAG) is a classification tool for assigning Determination, Examination, and Voluntary Compliance (VC) cases.

  2. Audience: EP Determinations, Examination, and VC staff.

  3. Policy Owner: Director, EP.

  4. Program Owner: EP.

  5. Program Goals: EP’s goals are to ensure that plans comply with the tax laws and to protect the public interest by applying the tax laws with integrity and fairness to all.

Background

  1. The CAG establishes a uniform rating system to help the Group Manager in assigning workload.

  2. The criteria are intended to be consistent with the Office of Personnel Management (OPM) position classification standards used to classify Tax Law Specialist/Revenue Agent positions. However, since the CAG is an IRS internal guide, it shouldn’t be cited as the basis for any official classification action or viewed as superseding OPM standards in any way.

  3. The CAG must be broad in its approach to grading and assigning cases. It can’t and doesn’t cover all possibilities, or account for unusual or unique elements in a case.

Acronyms

  1. These acronyms are used in this IRM:

    Acronym Term
    ABT Average Benefits Test
    CAG Case Assignment Guide
    DB Defined Benefit
    DC Defined Contribution
    DL Determination Letter
    DOL Department of Labor
    EBSA Employee Benefits Security Administration
    EDS EP/EO Determination System
    EP Employee Plans
    EPCRS Employee Plans Compliance Resolution System
    ESOP Employee Stock Ownership Plan
    FDIC Federal Deposit Insurance Corporation
    GT General Test
    KSOP Plan that combines tradition IRC 401(k) plan with an Employee Stock Ownership Plan
    OJI On-The-Job-Instructor
    OPM Office of Personnel Management
    PBGC Pension Benefit Guaranty Corporation
    RCCMS Reporting Compliance Case Management System
    RICS TE/GE Returns Inventory and Classification System
    SEP Simplified Employee Pensions
    SIMPLE IRA Savings Incentive Match Plan for Employees Individual Retirement Account
    TRASOP Tax Reduction Act Stock Ownership Plan
    TEDS Tax Exempt Determination System
    TE/GE Tax Exempt and Government Entities
    VC Voluntary Compliance

Case Grading

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

Determination Cases

  1. When a Determination Letter (DL) application is input onto the EP/EO Determination System (EDS) or Tax Exempt Determination System (TEDS), the applicable program assigns a potential case grade by applying the criteria in IRM 7.11.2.5, EP Determination Case Grading Criteria.

  2. EP Determinations specialists and Group Managers may change the case grade, if necessary, by applying the case grade adjustment factors in IRM 7.11.2.5.1, Case Grade Adjustments.

Examination Cases

  1. EP Classification assigns a potential grade to examination cases though a variety of tools. They apply the criteria in IRM 7.11.2.6, EP Examination Case Grading Criteria, to cases in combination with information from RICS, RCCMS, and other tools.

  2. The EP classifier 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.

Voluntary Compliance Cases

  1. The VC screening groups assign case grades to VC applications by applying the criteria in IRM 7.11.2.7, EP Voluntary Compliance Case Grading Criteria.

  2. During the processing of the VC case, the grade be adjusted, using the factors in IRM 7.11.2.7.1, Case Grade Adjustments, if the case requires additional technical analysis.

  3. The grade of the VC case is not affected by the case grade of any DL application that may have been submitted with respect to the plan.

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. However, this rule is not applicable to situations involving VC cases that have a related DL application.

    Example:

    A GS-11 case and a related GS-12 case should be assigned to a GS-12 specialist/agent. However, if a GS-11 VC case is associated with a GS-13 DL application, both cases do not have to be assigned to a GS-13 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 National 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.

    3. With respect to VC cases, the same VC specialist/agent 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/agent 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 VC case processing; the review of qualification failures; and proposed correction methodology.

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

Special Rule

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

EP Determination Case Grading Criteria

  1. All factors need not be present to determine the case grade. Only one factor must be present to raise 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 ABT, Demo 5

    8. Form 5300 / 5310 DC 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

    18. Initial cash balance plans (without conversion issues)

  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 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. Savings Incentive Match Plan for Employees Individual Retirement Account (SIMPLE IRA) plans

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

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, (for example, 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 a 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 or nondiscrimination ruling is requested

EP Examination Case Grading Criteria

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

  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 < 1,001

    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 IRC 403(b) plan is sponsored by an organization recognized by the IRS as a IRC 501(c)(3) organization

    2. The sponsor employs fewer than 1,000 employees

    3. There are no related IRC 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 IRC 408(p) plans (Simplified Employee Pensions (SEP) or SIMPLE IRA)

    5. All other plans without Grade 12 and 13 factors

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

Case Grade Adjustments

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

    • Funding and actuarial matters

    • Asset valuation issues (for example, investments in limited partnerships)

    • Prohibited transactions

    • Unrelated business income

    • Complex IRC 415 issues

    • Nondiscrimination issues (for example, GT, 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 the Department of Labor (DOL) and/or Pension Benefit Guaranty Corporation (PBGC)

  3. Factors that may decrease the case grade include:

    1. Involvement of the field actuary, 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 doesn’t include complicating issues justifying the higher grade. For example, a focused audit where the higher graded issues aren’t considered during the course of the examination.

EP Voluntary Compliance Case Grading Criteria

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

  2. GS-13: Factors include plans described below for Grade 13, for non-403(b) plans.

    a. Group VCP Submissions - Defined Contribution (DC) Plans
    b. Group VCP Submissions - Defined Benefit (DB) Plans
    c. IRC 401(a) Governmental Plans under IRC 414(d)
    d. Operational failures involving ESOP/TRASOP/KSOP plans
    e. Operational failures involving Cash Balance Plan conversions /Pension Equity Plans
    f. Operational failures involving DB Hybrid Plans
    g. Operational failures involving Multiemployer plans
    h. Any failures involving IRC 401(h) - Retiree Health Benefits
    i. Any failures involving IRC 457(b) plans
    j. Demographic failures whereby the plan failed to comply with: IRC 401(a)(4), IRC 401(a)(26), and IRC 410(b) under the following circumstances:
      i. The plan sponsor is part of any controlled group or affiliated service group (or has adverse employee leasing treatment)
      ii. The demographic failures were affected by corporate mergers/acquisitions
      iii. Where it is necessary to review a GT that is using cross testing (or an ABT) when benefits are being tested on a DB basis
    k. Miscellaneous plan document failures described in paragraphs c through i above, other than VCP submissions in which the sole failure addressed is a nonamender failure
    l. VC cases involving employee leasing or independent contractors
    m. VC cases with a high potential for adverse public relations and/or plans sponsored by high profile entities
    n. VC cases requiring coordination with the IRS’s Office of Disclosure - cases involving coordination with other governmental agencies (for example, Employee Benefits Security Administration (EBSA), Federal Deposit Insurance Corporation (FDIC), DOL, 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 §403(b).

    a. Operational/Demographic failure only or Operational/Demographic failure and Employer Eligibility failure where the IRC 403(b) plan is sponsored by:
      i. Universities
      ii. Hospitals
      iii. Schools (public or private) that has 1,000 or more employees
      iv. University foundations
      v. Any other IRC 501(c)(3) organizations that sponsor a IRC 403(b) plan/arrangement that has 1,000 or more employees.
  4. GS-12: Factors include plans described below for Grade 12 plans for non-§ 403(b) plans without Grade 13 factors.

    1. Operational failures involving Multiple Employer plans

    2. Operational failures involving Target Benefit plans

    3. Operational failures involving Cash Balance Plans without conversion

    4. Operational failures and miscellaneous plan document failures, other than nonamender failures involving all IRC 401(a) DC and DB plans that are not listed under the GS-13 factors or are in addition to those described in GS-11 factors. This includes profit sharing, IRC 401(k), money purchase, DB & stock bonus plans

    5. Demographic failures involving all IRC 401(a) DC plans where correction and testing doesn’t involve DB plans or cross testing where DC benefits are converted into DB benefits for ABT

    6. Orphan plans as defined in the Employee Plans Compliance Resolution System (EPCRS) revenue procedure

    7. Ineligible employer failures involving IRC 401(k) plans

    8. Required minimum distributions not timely made in accordance with IRC 401(a)(9) in a DB plan

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

    a. Operational/Demographic failures where the IRC 403(b) plan is sponsored by:
      i. Schools (public or private) with fewer than 1,000 employees
      ii. Non-profit organizations with fewer than 1,000 employees
      iii. Any other IRC 501(c)(3) organizations that sponsor a IRC 403(b) plan/arrangement with fewer than 1,000 employees
    b. VC cases in which the sole failure addressed in the VC case is an Employer Eligibility failure or where the sole failure addressed in the VC case include an Employer Eligibility Failure and the failure to adopt a written IRC 403(b) plan timely
  6. GS-11: Factors include plans described below for Grade 11 plans.

    1. Any qualified plan under IRC 401(a), even if it would otherwise contain GS-12 or 13 factors, where qualification failure(s) of the VC case are limited to nonamender failures.

    2. Any IRC 403(b) plan, even if it would otherwise contain GS-12 or 13 factors, where the sole failure addressed in the VC case is the failure to adopt a written IRC 403(b) plan on a timely basis.

    3. Failures in SEPs under IRC 408(k).

    4. Failures in SIMPLE IRA plans under IRC 408(p).

    5. Loan failures where participant loans did not comply with IRC 72(p) in form or in operation.

    6. Required minimum distribution not timely made in accordance with IRC 401(a)(9) in a DC plan.

  7. GS-09 Factors include plans described below for Grade 09 (all plans)

    1. Any VC case where the review is limited to an inspection of the submitted materials to determine whether the case is complete and has satisfied the administrative requirements under the EPCRS revenue procedure.

    2. Any VC case assigned to VC personnel where the sole purpose is to collect missing or incomplete items from the VCP applicant in order to perfect submissions that are otherwise not in compliance with the administrative requirements under the EPCRS revenue procedure. Examples include, but are not limited to, missing Model VCP Submission Compliance statement schedules, incorrect signatures, missing or unsigned penalty of perjury statements, missing enclosures, missing or incorrect compliance fees.

    3. Any VC case assigned where the VC Group Manager, or VC Program Coordinator, or Group Coordinator or higher graded specialist/agent has indicated the submission can be closed, and the actions left to be taken are limited to the administrative actions needed to close the VC case.

Case Grade Adjustments

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

    1. The size of the plan

    2. Actuarial issues in DB plans, including failures to comply with the restrictions imposed by IRC 436 in operation

    3. Nondiscrimination issues (for example, GT, 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. Correction proposal that isn’t a correction method described in Appendix A or B of the EPCRS revenue procedure

    8. Proposed correction method that involves a retroactive plan amendment to change the plan terms 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 8-3)

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

  2. Factors that may decrease the case grade include:

    1. Significant involvement of a field actuary, OJI, VC Group Manager, VC Program Coordinator, VC Group Coordinator or senior agent/specialist

    2. Specialist review that does not include complicating issues justifying higher grade

    3. Failure(s) corrected in accordance with the correction methods listed in Appendix A or B of the EPCRS revenue procedure

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 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 can’t be graded using IRM 7.11.2.5, EP Determination Case Grading Criteria, IRM 7.11.2.6, EP Examination Case Grading Criteria or, IRM 7.11.2.7, EP Voluntary Compliance Case Grading Criteria, 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:

    Before closing a case, the Group Manager may adjust the case grade upward, if complicating factors were found during review, or downward, if anticipated complexities did not develop.

  4. Refer to IRM 7.11.2.4, Case Assignment Requirements, for more on the group manager's responsibility with respect to case assignment.

Agent Responsibilities

  1. The EP specialist/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.