Employee Stock Ownership Plan Review Worksheet



Employee Plans News - Issue Number: 2011-5 – June 22, 2011discusses how EP Determinations has formed the ESOP Cadre and is changing some procedures for reviewing ESOPs submitted on IRS Form 5300 – Application for Determination for Employee Benefit Plan during Cycles C - E:

W-2 Compensation

What Does W-2 Compensation Really Mean? describes how the W-2 definition of compensation should generally be Box 1 of Form W-2, adjusted for elective deferrals (when applicable), and notes the complications of Roth deferrals and the problems with using Box 5 compensation:

ERISA Records Retention Policy

Hang On To Your Records discusses two records retention guidelines, the "7-Year Rule" (business records) and the "6-Year Rule" (ERISA records):

Updated 409(p) Transfer Plan Document Sample Language

The IRS posted an update to the Sample Plan Language (SPL) for IRC Section 409(p) Transfers. The changes incorporate some of The ESOP Association Comments on Sample Plan Language for 409(p) Transfers. The newly inserted/changed language is in red below:

Sample Language for Section 409(p) Transfers - Non-ESOP Portion of Plan

1. Non-ESOP Portion. Assets held under the Plan in accordance with this Section are held under a portion of the Plan that is not an employee stock ownership plan (ESOP), within the meaning of section 4975(e)(7) of the Internal Revenue Code. Amounts held in the portion of the Plan that is not an ESOP (the Non-ESOP Portion) shall be held in accounts that are separate from the accounts for the amounts held in the remainder of the Plan (the ESOP Portion). Any statements provided to Participants and/or Beneficiaries to show their interest in the Plan shall separately identify the amounts held in each such portion. Except as specifically set forth in this Section, all of the terms of the Plan apply to any amount held under the Non-ESOP Portion of the Plan in the same manner and to the same extent as an amount held under the ESOP Portion of the Plan.

2. Transfers from ESOP Portion to Non-ESOP Portion of Plan to Avoid Nonallocation Years. (a) In the case of any event that the Plan Administrator determines would otherwise cause a nonallocation year (as defined in section xxx of the Plan) to occur (referred herein as a "nonallocation event"), shares of employer stock held under the Plan before the date of the nonallocation event shall be transferred from the ESOP portion of the Plan to the Non-ESOP portion of the Plan as provided in (2)(a). Events that may cause a nonallocation year include, but are not limited to, a contribution to the Plan in the form of shares of employer stock, a distribution from the Plan in the form of shares of employer stock, a change of investment within a Plan account of a disqualified person (as defined in section xxx of the Plan) that alters the number of shares of employer stock held in the account of the disqualified person, or the issuance by the employer of synthetic equity as defined by section 409(p)(6)(C) of the Internal Revenue Code and section 1.409(p)-1(f) of the Treasury Regulations. A nonallocation event occurs only if (i) the total number of shares of employer stock that, held in the ESOP account of those Participants who are or who would be disqualified persons after taking into account the Participant's synthetic equity and the nonallocation event exceeds (ii) the number of shares of employer stock equal to 49.9% of the total number of shares of employer stock outstanding after taking the nonallocation event into account (causing a nonallocation year to occur as described in Section xxx of the Plan). The amount transferred under this section shall be the amount that the Administrator determines to be the minimum amount that is necessary to ensure that a nonallocation year does not occur, but in no event is the amount so transferred to be less than the excess of (i) over (ii). The Administrator shall take steps to ensure that all actions necessary to implement the transfer are taken before the nonallocation event occurs.

[The plan may provide for a stated percentage not less than 40% instead of 49.9% as used in (ii) above. If this is chosen use the following language instead of the above section:

2. Transfers from ESOP Portion to Non-ESOP Portion of Plan to Avoid Nonallocation Year. (a) In the case of any event (referred herein as a "nonallocation event") that the Plan Administrator determines would otherwise cause the total number of shares of employer stock held in the ESOP account of those Participants who are or who would be disqualified persons after taking into account the Participant's synthetic equity and the nonallocation event to exceed the number of shares of employer stock equal to [a stated percentage not less than 40% but not exceeding 49%] of the total number of shares of employer stock outstanding, shares of employer stock held under the Plan before the date of the nonallocation event, shall be transferred from the ESOP Portion of the Plan to the Non-ESOP Portion of the Plan as provided in this section. Actions that may cause a nonallocation event, include, but are not limited to, a contribution to the Plan in the form of shares of employer stock, a distribution from the Plan in the form of shares of employer stock, a change of investment within a Plan account of a disqualified person (as defined in section xxx of the Plan) that alters the number of shares of employer stock held in the account of the disqualified person, or the issuance by the employer of synthetic equity as defined by section 409(p)(6)(C) of the Internal Revenue Code and section 1.409(p)-1(f) of the Treasury Regulations. A nonallocation event occurs only if (i) the total number of shares of employer stock that, held in the ESOP account of those Participants who are or who would be disqualified persons after taking into account the Participant's synthetic equity and the nonallocation event, exceeds (ii) the number of shares of employer stock equal to [the previously stated percentage] of the total number of shares of employer stock outstanding after taking the nonallocation event into account. The amount transferred under this section shall be the amount that the Administrator determines to be the minimum amount that is necessary to ensure that no nonallocation event occurs, but in no event is the amount so transferred to be less than the excess of (i) over (ii). The Administrator shall take steps to ensure that all actions necessary to implement the transfer are taken before the nonallocation event occurs.]

(b)(1) Except as provided for in (b)(2), at the date of the transfer, the total number of shares transferred, as provided for in (a)(1), shall be charged against the accounts of Participants who are disqualified persons (i) by first reducing the ESOP account of the Participant who is a disqualified person whose account has the largest number of shares (with the addition of synthetic equity shares) and (ii) thereafter by reducing the ESOP accounts of each succeeding Participant who is a disqualified person who has the largest number of shares in his or her their account (with the addition of synthetic equity shares). Immediately following the transfer, the number of transferred shares charged against any Participant's account in the ESOP portion of the Plan shall be credited to an account established for that Participant in the Non-ESOP portion of the Plan.

(2) Notwithstanding (b)(1), the number of shares transferred shall be charged against the accounts of Participants who are disqualified persons (i) by first reducing the account of the Participant with the fewest shares (including synthetic equity shares) who is a disqualified person and who is a Highly Compensated Employee (as defined in Section xxx of the Plan) to cause the Participant not to be a disqualified person, and (ii) thereafter reducing the account of each other Participant who is a disqualified person and a Highly Compensated Employee, in order of who has the fewest ESOP shares (including synthetic equity shares). A transfer under this (b)(2) only applies to the extent that the transfer results in fewer shares being transferred than in a transfer under (b)(1).

(c) (1) If two or more Participants described in (b) have the same number of shares, the account of the Participant with the longest service shall be reduced first.

(2) Beneficiaries of the Plan are treated as Plan Participants for purposes of this section.

3. Income Taxes. If the Trust owes income taxes as a result of unrelated business taxable income under section 512(e) of the Internal Revenue Code with respect to shares of employer stock held in the Non-ESOP portion of the Plan, the income tax payments made by the Trustee shall be charged against the accounts of each Participant or Beneficiary who has an account in the Non-ESOP portion of the Plan in proportion to the ratio of the shares of employer stock in such Participant's or Beneficiary's account in the non-ESOP portion of the Plan to the total shares of employer stock in the non-ESOP portion of the Plan. The Employer shall purchase shares of employer stock from the Trustee with cash (based on the fair market value of the shares so purchased) from each such account to the extent cash is not otherwise available to make the income tax payments from the Participant's or Beneficiary's ESOP accounts or his or her other defined contribution plan accounts.

Post-Gust Required Amendments

Required Amendments (Revised 7/8/2008) is a chart with a list of required amendments and due dates for defined contribution plans since the GUST restatement:

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