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 and ceased issuing favorable determination letters while they awaited further guidance.

The Employee Plans Rulings and Agreements Director began issuing memos on ESOP issues in November 2009. While the guidance helps give the reviewers as well as the ESOP community a better understanding of the thought process of the IRS, the memos are not formal technical advice memorandums (TAMs) and do not have not any legal authority.

During the recent IRS ESOP Update Phone Forum, the IRS reiterated that the memos could not be considered formal guidance while recognizing that the current regulations are old and incomplete. They also stated that while they are not formally holding all ESOP determination letter requests (noting that some have been recently issued), many requests are on hold as the determination letter branches are still waiting to obtain additional guidance.

We reviewed one of the memoranda, Response to Technical Assistance Request #4, in An IRS Analysis of ESOP Rebalancing and ESOP Reshuffling.