Companies should thoughtfully approach any changes to the ESOP’s distribution rules after it is set up. Watch this video to learn more about changing distribution rules.
As ESOPs mature, as loans are repaid, as shares are allocated, as participants get older and become eligible for distributions and the value of stock fluctuates, it oftentimes becomes necessary to change the distribution provisions in the ESOP to meet those evolving needs. With that being said, however, it’s important that those changes to the distribution rules be done carefully and in writing. Finally, most recently the Internal Revenue Service has said that distribution provisions are part of the plan document whether they’re in a separate plan document called a distribution policy or in the main plan document. Care should be taken to comply with the plan amendment rules when changing a plan’s distribution provisions.