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ESOP Termination Due to Acquisition - Distribution


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My employer (financial institution) merged with and into another financial institution on July 1st, 2015. The ESOP plan was to be terminated and distributions/roll-overs were to occur shortly thereafter. The acquiring institution filled an application for a IRS Determination Letter thus informing all ESOP participants that distributions would not be made until the IRS issued the Determination Letter. HR was not forthcoming with information, however in early May, after several ignored emails, we were informed that the IRS issued the Determination Letter on 4/26/16. Distribution letters were mailed last week and received on 5/16, however, inquiries about the distributions revealed that our employer would not release distributions until after July 1st. Requests for ESOP SPDs have been ignored thus far.

Is the normal operating procedures for ESOP terminations?

Thanks.

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Have I seen smaller gaps between the mailing of the distribution form and the first payments? Yes

The gap being discussed doesn't seem outside reasonable. By law they have to give people 30 days to reply to the forms. So if they want to do them in a single batch that means they can't send checks before 6/15. It does take a few weeks to get all the checks ready and make sure no one is over or under paid. After all if someone is over paid they aren't very likely to return the payment when told about the over payment. So it is important to get the amounts right.

So if you add a week or two to the 6/15 date you are getting to around 7/1.

They should give you a copy of the SPD but I doubt it will tell you that they are required to make the payment faster. It most likely uses "as soon as administratively feasible" language. So they will claim the time frame outline is what is administratively feasible.

If the question is it normal to wait until the IRS issues the Determination Letter that is very common practice.

Does it sound like they could have done a better job communicating-- yea it does. But bad communication and you have an actionable complaint isn't often times the same thing.

Hope that helps.

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