How to Fill Out and File Form 5309: ESOP Requirements and User Fee

To fill out IRS Form 5309, work through the yes-or-no questions confirming that your employee stock ownership plan document contains each provision required under Internal Revenue Code Section 4975(e)(7), then attach the signed form to Form 5300 (or Form 5310 if the ESOP is terminating) and file the complete package with the IRS EP Determinations office along with the user fee.¹² The form itself is short. What makes it work is the plan document behind it: every “yes” you check has to be backed by specific language in the plan.

Form 5309 Is Never Filed by Itself

Form 5309 is an attachment. For a new or amended ESOP seeking a determination letter, it rides along with Form 5300 (Application for Determination for Employee Benefit Plan).² If the ESOP is winding down and you want a final determination, Form 5309 attaches to Form 5310 instead.

The Form 5300 instructions specifically call for three ESOP-related items beyond the standard attachments:³

The completed Form 5309
A statement indicating whether the employer is a C corporation or an S corporation
An explanation if the employer’s corporate status changed after the ESOP was originally adopted

Get the corporate-status statement into the package. The C-versus-S distinction affects several ESOP rules the reviewer applies, and its absence is a common reason applications come back.

Information You Need Before You Start

The header on Form 5309 mirrors identifying details already on Form 5300. Have these ready:

Employer Identification Number (EIN): the nine-digit number assigned to the business.
Plan number: the three-digit number the sponsor assigns to distinguish this plan from others the company maintains. Pension plans, including ESOPs, are numbered consecutively beginning with 001.
Plan year-end date: the last day of the plan’s fiscal year.

Form 5309 must be signed by the principal officer authorized to sign on behalf of the plan sponsor. Stamped signatures are not accepted.

Lines 4a Through 4k: Requirements Every ESOP Must Meet

The first block of questions applies to every ESOP. Each one asks whether the plan document contains a specific required provision. You are answering yes only if the language is actually in the document — not if you intend to add it later. The provisions the form tests for include whether the plan:²

Designates the arrangement as an ESOP under Section 4975(e)(7).
Is designed to invest primarily in qualifying employer securities as defined in Section 409(l).
Gives each participant the right to direct the plan on how to vote allocated securities, as required by Section 409(e).
Allows participants entitled to a distribution to demand that benefits be paid in employer stock, with exceptions for S corporations and banks legally prohibited from redeeming their own stock.
Includes a put option letting participants sell non-publicly-traded stock back to the employer at fair value.
Prevents allocation of employer securities to disqualified persons during a nonallocation year if the plan holds S corporation stock, per Section 409(p).
Permits qualified participants to diversify a portion of their account out of employer securities under Section 401(a)(28)(B) and Section 401(a)(35).
Requires independent appraisals of employer securities that are not publicly traded.

The form also asks whether the arrangement is a stock bonus plan or a combination stock bonus and money purchase plan. That classification affects how contributions and distributions operate under the plan.

Every “no” is a red flag for the reviewer. If a required provision is genuinely missing, amend the plan document before you file. Submitting an application knowing a “no” is in it usually leads to an adverse determination.

Lines 5a Through 5g: Leveraged ESOP Questions

If the ESOP borrows money to purchase employer securities, complete the second block as well. These questions confirm the plan document complies with the exempt loan rules under Treasury Regulation Section 54.4975-7, including whether:⁴

Loan proceeds are used within a reasonable time to acquire qualifying employer securities or to repay a prior exempt loan.
The plan maintains a suspense account to hold unallocated shares purchased with loan proceeds.
Collateral for the loan is limited to the securities purchased with the loan.
No creditor of the exempt loan has recourse against plan assets beyond the collateral and related contributions.
Annual loan payments do not exceed contributions and earnings available for that purpose.
Employer securities are forfeited only after other plan assets.

Skip this block only if the ESOP does not use an exempt loan.

Tax Credit ESOPs

The original Form 5309 included questions about tax credit ESOPs. Those questions have been deleted from the current form. If your plan involves a tax credit ESOP, note that in your cover letter and refer to Treasury Regulation Section 1.46-8(d) for the formal requirements.²

Assembling the Full Package

Form 5309 and the C/S statement are only two pieces. The Form 5300 instructions require the complete package to include:³

The current plan document, with participation rules, vesting schedules, contribution formulas, and distribution provisions. If the plan has been restated, include both the current and prior versions.
All signed and dated amendments. If the plan was previously reviewed, attach the last favorable determination letter along with every amendment adopted since that letter was issued.
A Voluntary Correction Program compliance statement or Audit Closing Agreement, if the plan went through the IRS correction program.
Completed Form 5300 with its procedural requirements checklist filled out.
The C/S corporation statement and Form 5309.

Make sure every page of the plan document and trust agreement is signed and dated. Missing signatures are one of the fastest ways to get a package returned without review.

User Fee

A determination letter application requires a user fee. Fee amounts by request type appear on Form 8717 (User Fee for Employee Plan Determination Letter Request), which must accompany a mailed application.⁵ If you submit through Pay.gov, Form 8717 is not required because the fee is paid electronically at submission.³

Amounts are set in the annual revenue procedure and change periodically, so confirm the current fee on the latest Form 8717 or revenue procedure before mailing.⁶ The wrong fee, or no fee, gets the entire package returned.

Where to Mail the Package

Send the complete application to:⁷

Internal Revenue Service
Attention: EP Determination Letters
P.O. Box 12192
TE/GE Stop MS 31A Team 105
Covington, KY 41012-0192

For express mail or a private delivery service, use the street address:

Internal Revenue Service
Attention: EP Determination Letters
7940 Kentucky Drive
TE/GE Stop MS 31A Team 105
Florence, KY 41042

Certified mail with a return receipt creates a verifiable delivery record. Keep a complete copy of the whole package, including every page of the plan document, before mailing.

What Happens After You File

A team of ESOP specialists at the IRS reviews the plan document against the Code and regulatory requirements.⁸ Processing times vary and the IRS does not publish a fixed estimate for ESOP applications. Plan for a wait of several months at minimum.

If the reviewer needs clarification or spots inconsistencies, expect a letter requesting additional information by a specified deadline. Respond on time. Missing the deadline can result in the IRS closing the case or issuing an adverse determination. A successful review ends in a favorable determination letter, which the sponsor should keep as a permanent record supporting the plan’s qualified status.

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Internal Revenue Service. About Form 5309, Application for Determination of Employee Stock Ownership Plan
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Internal Revenue Service. Form 5309 – Application for Determination of Employee Stock Ownership Plan
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Internal Revenue Service. Instructions for Form 5300
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Internal Revenue Service. Form 5309 – Application for Determination of Employee Stock Ownership Plan
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Internal Revenue Service. About Form 8717, User Fee for Employee Plan Determination Letter Request
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Internal Revenue Service. User Fees for Employee Plans Determination, Opinion and Advisory Letters
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Internal Revenue Service. Apply for a Determination Letter – Individually Designed Plans
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Internal Revenue Service. Employee Stock Ownership Plans Determination Letter Application Review Process