Retirement Plan Solutions

Employee Stock Ownership Plans (ESOPs)

Learn how to set up an effective ESOP asap.

An Employee Stock Ownership Plan (ESOP) is a, defined contribution retirement plan that allows employees to own company stock and can create a market for the stock of closely held companies. Unlike other employee benefit plans, ESOPs are required by law to invest primarily in the securities of the sponsoring employer.  They can also provide the ability to borrow money. As a result, these specialized plans often mean more compliance and risk.

Set of keys with a success keychain attached to illustrate importance of ESOPWhether you already have an ESOP or are considering starting one, we’re here to help. Our experienced retirement plan experts  will help you with the planning, execution and administration of your plan.

Let us evaluate how an ESOP can impact your business—today and tomorrow. We’ll provide strategies to operate and communicate your ESOP to your employees. And by working side-by-side with your accountants, attorneys and management team, together we’ll streamline efficiency and bring greater value to your employees.

Complete in-house consulting 

  • Develop ESOP Feasibility Study to help plan sponsor understand how an ESOP will impact their business issues.
  • Prepare Repurchase Obligation Study to evaluate relevant indicators of your business performance and project your ESOP repurchase liability years into the future.
  • Provide Audit Assistance. We partner with accounting firms that audit the ESOP financial statements and government forms as part of our ESOP administration services, providing them detailed reports to improve the efficiency of their review process and minimize client expense.
  • Help you understand the 1042 treatment and requirements that allow a shareholder to qualify for a deferral of taxation from the proceeds of the sale of their shares to the ESOP

Standard administration services

  • Administer the plan according to the terms of the plan document
  • Monitor completion of critical reports and filings
  • Coordinate with other retirement plan service providers as necessary
  • Determine which employees have met the plan requirements to enter the plan and share in contribution allocations
  • Maintain historical participant data to compute timing of forfeitures, vesting, and diversification eligibility
  • Report all trust activity that occurred in the ESOP or is accrued for the reporting period
  • Track stock transactions using multiple share accounts to properly identify dividends and cost basis attributed to each unique share account
  • Provide required updates to participants with individual participant statements and disclosures
  • Allow participants to take distributions from the plan at the right time by completing customized diversification and/or request for benefit election forms
  • Test the plan to confirm the ESOP plan document provisions are followed and the Internal Revenue Service and Department of Labor rules and regulations are satisfied

Why establish an ESOP at your company?

  • An ESOP creates a market for closely held shares in a private company.
  • An ESOP makes pre-tax dollars available to finance company growth and/or to create ownership liquidity at the time of retirement.
  • An ESOP will enable the company to buy out current owners, using tax-deductible company contributions enabling the company to be sold to employees.
  • ESOPs are used to provide a market for the shares of a departing owner of a profitable, closely held company. 
  • An ESOP provides C-Corp business owners with the ability to sell their shares to an ESOP and defer tax on the proceeds in a § 1042 tax-free exchange so long as the business owners reinvest the proceeds in qualified replacement property with in a specified period of time and the ESOP holds 30% or more or the company stock. Certain other restrictions also apply that we can explain to you.
  • An ESOP allows employees to share in the current and future economic rewards of ownership.
  • S-Corps can also set up ESOPs but the rules differ and the 1042 election discussed above is not available.

Take the next step

To learn more about our ESOP services, contact us or call (800) 436-6689.