In 1996, Congress enacted legislation[1] that for the first time permitted an employee stock ownership plan (ESOP) to be an eligible S corporation shareholder, effective for tax years beginning after December 31, 1997. In 1997 the law was modified further to facilitate ESOPs becoming S corporation ...
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Who Are the ESOP’s Trustees and How Do I Determine That?
ESOP trustees are selected by the Board of Directors. Watch our video to learn more about how to choose your ESOP trustees.
ESOP Trustees
The law requires the board to be responsible for the prudent selection, monitoring, removal, and ultimately, replacement of the trustees. The ...
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Who Is Legally Responsible for Valuing the ESOP Stock?
The ESOP appraisal process is the legal responsibility of the trustee. Learn more about the process in this video.
ESOP Valuation
The ESOP trustee is the owner of the shares and must report the value of the stock annually. The trustee is also required by law to use a ...
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Who Votes the Shares Held in the ESOP?
The Code requires that company stock in the ESOP must have full voting rights. In this video, we discuss who votes the shares held in the ESOP.
Voting Rights for ESOP Participants
Since the ESOP trustee is the shareholder, the trustee is required by law and has a fiduciary duty by ...
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Who Participates in the ESOP?
Since an ESOP is a qualified retirement plan, it is subject to the same eligibility and coverage rules as other plans such as profit-sharing plans. Watch our video to learn more about who participates in the ESOP.
ESOP Participation
Generally, the ESOP plan covers all employees ...
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Who Decides How to Use ESOP Dividends?
ESOP dividends are earnings of the trust and subject to the investment decisions of the ESOP trustee. Learn more about who decides how to use ESOP dividends in our video.
ESOP Dividends
ESOP dividends are typically planned for and structured when transactions are put together and ...
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Who Are ESOP Fiduciaries and What Are Their Responsibilities?
All qualified retirement plans are required under ERISA to have two types of fiduciaries. Watch the video to learn more.
Types of Fidicuiaries
The types of fiduciaries required for qualified retirement plans are a trustee and an administrator. In the ESOP context, very often the ...
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When Do Employees Get to Vote on the Sale of the Company?
Whether employees have a right to vote on the sale of a company actually comes down to the form of the transaction. Learn more in the video.
The Sale Transaction
If the sale transaction is a purchase of the stock held in the ESOP, that is actually an investment decision that the ...
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When an ESOP Company Is Sold, Who Pays the ESOP Loan?
When an ESOP company is sold, all of the shares are sold or all of the assets of the company are sold. In this video, we discuss who pays the ESOP loan.
The ESOP Loan
It's easiest to think of an ESOP loan as essentially a mortgage on the ESOP shares. If the stock is sold, the ...
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Confused by the terminology? Check our Glossary of Terms