A qualified retirement plan that holds employer stock, particularly if the shares are not traded on an exchange, brings special challenges to the administration of that plan. Whether you are looking to start a plan, or the plan you have holds some or all of your employer stock, our talented team would love to help you with the administration. If you have been searching for and ESOP Company, you've come to the right place!
THREE EXAMPLES
1. Stock Bonus Plan. The employer makes a contribution to the plan of stock instead of cash. The stock is allocated to all those eligible for a contribution that year. Profit sharing plans are allowed to have up to 10% of the plan assets held in the form of employer stock, as long as your document allows this.
2. Rollover Business Startups (ROBS) plans where rollover money is used to buy stock for a new business venture. With an individual account, the individual may elect to invest up to 100% of their account in the form of employer stock. By rolling cash into the plan, then using that cash to buy company stock, the cash is freed up to help with business expenses.
3. Employee Stock Ownership Plan (ESOP) is a plan designed primarily to hold employer stock. The plan can be leveraged (money is borrowed to buy the stock), or non-leveraged (shares are purchased for cash). ESOPs that own 100% of an S-Corporation stock may be able to eliminate corporate income taxes. Dividends can be paid on shares held by the plan. There is a lot of flexibility in designing an ESOP, and require the skills of an experienced ERISA attorney. As your ESOP Company (the TPA), we get involved in the feasibility studies with the attorney, then take on the administration after the plan design is complete.
ADMINISTRATION
Much of the administration of a plan that holds employer stock is the same as other profit sharing plans. One difference is that the employer stock must be valued by an independent appraiser each year. Valuations often cost between $5,000-$10,000 per year depending on the circumstances. We use that valuation in our work and the Form 5500 filing. ESOPs in particular also require a variety of other responsibilities in administration. Some functions that may apply include:
SUMMARY
Administering ESOPs takes a special skill set. As an independent TPA that works with all types of plans, we find ESOPs intriguing and fun. If you have an ESOP and are looking for an ESOP Company to help with administration, or if you’re looking to set up a plan with employer stock, please contact us today! Click here to arrange for one of our pension consultants contact you. We would be happy to put together our services and pricing proposal to help you find the best solution for your needs.
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