2019 ESOP and Pension Plan Limits

The IRS has announced the 2019 pension plan limits, including the following:

 

An ESOP is a Business Transition Tool

An ESOP is a Business Transition Tool

ESOP stands for Employee Stock Ownership Plan.  An ESOP is a qualified retirement plan that can be used as a business transition tool and as an employee ownership vehicle.

An employee stock ownership plan (ESOP) is a business transition tool that establishes an ESOP trust to be an ongoing perpetual owner of the company.

What is an Employee Stock Ownership Plan (ESOP)?

What is an Employee Stock Ownership Plan (ESOP)?

ESOP stands for Employee Stock Ownership Plan.  An ESOP is a qualified retirement plan that can be used as a business transition tool and as an employee ownership vehicle:

2018 ESOP and Pension Plan Limits

The IRS has announced the 2018 pension plan limits, including the following:

  • 401(k) Deferral Limit - $18,500
  • Annual Additions Limit - $55,000
  • Maximum Compensation Limit - $275,000
  • Catch-Up Contribution Limit - $6,000
  • Highly Compensated Employee - $120,000
  • ESOP 5-Year Distribution Threshold - $1,105,000
  • ESOP Additional Year Threshold - $220,000

Responsibilities of an ESOP Company Board of Directors

Many business owners that have implemented or are exploring an employee stock ownership plan (ESOP) may not have an active Board of Directors in place. Often times the Shareholder(s) are operating as the Director(s) of the company as they manage the day-to-day operations, and are not separately meeting as a Board to formally achieve the Corporate Governance responsibilities of the Board. Of those that do have a functioning Board, many operate the Board as an extension of the senior management team to make short-term operational decisions, rather than long-term, strategically focused decisions in line with corporate governance best practices. 

2017 ESOP and Pension Plan Limits

The IRS has announced the 2017 pension plan limits, including the following:

  • 401(k) Deferral Limit - $18,000

  • Annual Additions Limit - $54,000

  • Maximum Compensation Limit - $270,000

  • Catch-Up Contribution Limit - $6,000

  • Highly Compensated Employee - $120,000

  • ESOP 5-Year Distribution Threshold - $1,080,000

  • ESOP Additional Year Threshold - $215,000

Qualified Charitable Distributions (QCD)

The Protecting Americans from Tax Hikes Act of 2015 (the PATH Act) was signed into law on December 18, 2015.  One item covered under the law was the permanent extension of the option to take a qualified charitable distribution (QCD).  This option, first available in 2006, allows IRA participants to exclude up to $100,000 from gross income for donations paid directly to a qualified charity from their IRA.

The Protecting Americans from Tax Hikes Act of 2015 (the PATH Act)

President Signs Extenders And Omnibus Acts, Impacting Broad Range Of Provisions provides a summary of The Protecting Americans from Tax Hikes Act of 2015 (the PATH Act) that was signed into law on December 18, 2015.  The legislation permanently extended provisions that previously had to rely on “extenders” to apply retroactively to the past year and also extended other provisions.  Here are some relevant highlights:

2016 ESOP and Pension Plan Limits

The IRS has announced the 2016 pension plan limits, including the following:

2014 ESOP Benefit Payment Government Filings (IRS Forms 1099-R, 1096, 945)

If you paid any ESOP or other qualified retirement plan distribution of $10 or more last year you will have to prepare and file some information returns: Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.

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