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Do You Have a Missing ESOP Participant?

If it hasn’t happened to you already, you may have a future encounter with not being able to locate a former ESOP participant with a vested account balance.  This can especially occur when there is a delay in paying the distributions to the ESOP participants due to participants moving to a new address and not providing notice to the Plan Administrator.  When this happens, there are a couple of steps you should follow.

ESOP S Corporation Basis Adjustments

My previous blog post discussed the Importance of Tracking Cost Basis in ESOPs.  Today I want to expand on this topic and discuss how S Corporation Basis Adjustments apply to ESOPs and impact cost basis as well. 

The Importance of Tracking Cost Basis in your ESOP

In my previous blog post regarding Net Unrealized Appreciation (NUA) tax benefits for ESOP participants, I mentioned the cost basis of stock distributions is taxed at the individual’s ordinary income tax rate.  In order to accurately determine the NUA on a stock distribution, the cost basis has to be tracked as part of the plan administration process.

ESOP Glossary

This blog lists common terms found in the lifecycle of an ESOP.  For more information on an particular term, click on the item below.

ESOP Administration: Methods of ESOP Distributions

To complete my blog series on ESOP distributions, today I’d like to discuss the methods of distributions available to ESOPs. For information on Timing of ESOP Distributions and Forms of ESOP Distributions, please visit my previous blog posts.

ESOP Administration: Timing of ESOP Distributions

ESOPs have their own special set of rules regarding the timing of distributions to terminated participants with vested account balances.  IRC Section 409(o)(1)(A) instructs the distribution of the participant’s account balance in the plan will commence not later than 1 year after the close of the plan year—

ESOP Administration: Forms of ESOP Distributions

Now that we are mid-way through 2012, I thought it would be a good time to write a series of blogs on ESOP Distributions, as most calendar year plans are in, or will soon be in, their ESOP distribution processing season.

ESOP Administration: ERISA Fidelity Bonding

Fidelity bonding requirements were established with The Employee Retirement Income Security Act of 1974 (ERISA) “to protect employee benefit plans from risk of loss due to fraud or dishonesty on the part of persons who “handle” plan funds or other property.”  The U.S. Department of Labor (DOL) released Field Assistance Bulletin No. 2008-04 on November 25, 2008 to provide guidance on the plan bonding requirements.  Since ESOPs are subject to ERISA, they must comply with the fidelity bonding requirements as well.   

ESOP Administration: Account Vesting

Since an ESOP is a qualified defined contribution plan, it needs to follow the vesting rules described in IRC Section 411(a)(2)(B), which provides a plan must use a schedule at least as beneficial as the 3-year cliff vesting schedule or the 6-year graded vesting schedule for employer discretionary contributions. 

ESOP Administration: Release of Shares - Part 2 (Special Rule)

As mentioned in my previous post, ESOP plan documents will typically indicate the share release formula can be either of the two acceptable formulas, as defined in the Treasury Regulations Sec. 54.4975-7(b)(8):

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