In this video, we discuss how S corporation distributions can be used by an ESOP.
S corporation distributions can be an important source of liquidity and cash flow for the plan. They can be used to pay expenses of the plan, such as appraisal fees, trustee fees, and administrative expenses. They can be used to make payments on the loan that was used to buy the stock in the ESOP and they can also be used to pay benefits from the plan. The distributions can provide the liquidity for converting stock in the participant accounts to a cash distribution thus resulting in a federal income tax subsidy for the actual costs of benefits in the plan.