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Case StudiesAdministering a Mature ESOPThe XYZ Company Employee Stock Ownership Plan came to SES Advisors as a mature plan sponsored by a C corporation. The company was interested in doing an additional leveraged transaction to enable the ESOP to buy shares from the remaining shareholder and to become 100% ESOP owned. They also wondered how they were going to handle the distribution process once the original loan was paid in full. The first thing SES Advisors did was to audit the plan from an administrative perspective. The audit included review of eligibility, allocations and vesting from prior reports as well as adherence to disclosure and filing deadlines, and statutory compliance with Internal Revenue Service and Department of Labor regulations. Because SES exclusively administers ESOPs, we are able to uncover and correct problems that may be overlooked by administrators less experienced in the intricacies of ESOPs. The team at SES Advisors immediately set to work correcting the problems in the most efficient way to satisfy both the regulatory agencies and the plan trustees. The administration team at SES Advisors helped the company’s management team design customized distribution forms, participant statements and allocation reports. SES advised the client on different ways to handle their upcoming repurchase obligation resulting from the pay off of the loan and the diversification requirement. SES also advised the management team on how to maximize their deductible dividends to make loan payments and how they could buy out the remaining shareholder and continue to enjoy the tax benefits of sponsoring their ESOP. A senior administrator led the initial takeover process and comprehensive audit. As in most cases, the same senior administrator became the primary contact at SES Advisors. The assigned administrator knew the XYZ Company inside and out and was available everyday for any questions regarding their ESOP. In addition, the senior administrator was responsible for the annual allocations, compliance testing, disclosures, (forms & statements) and filing for the ESOP. Whatever the future holds for the XYZ Company ESOP, SES Advisors will be able to administer the ESOP and consult with the management team of the company and the trustees of the ESOP. They may consider making an S corporation election. Will they need help with their repurchase obligations and changing their distribution policy? Perhaps they will need help if selected for a future audit by the IRS or DOL? Maybe they will be involved with an acquisition or merger? No matter what the future brings for the XYZ Company ESOP, SES Advisors will be there to help. -Authored by Mychelle Holloway. If you have questions about this case study, please contact Mychelle at her To meet the SES Advisors Recordkeeping Team, click here. |
