ESOP Guy

Ok lets be dumb and set aside the oddities but they have been covered enough I won't beat the dead horse too much. I would check if this is an Affiliated Service Group. I have to admit I know enough about these to know to look as you see them infrequently. I mean what are they doing for this company as "owners" if not managing it? It might not be a service organization for example. My guess even if they think they can thread the needle on the Affiliated Service Group rules and so forth in an audit the way they are being paid becomes the issue. This seems to be set up to exclude the rank and file from benefits they want for themselves. I just try to avoid the stink of pigs in this job and this has the stink of pigs trying to get benefits for themselves they aren't willing to give the rank and file.

Does the RR plan document allow for the RR in? Are the NR union employees excluded by document and the benefit subject to good faith bargaining? If you are excluding the one group by document and they had good faith bargaining to that effect that is a statutory exclusion. They aren't in the coverage test. I am pretty sure you test the included union people separately from the non-union for 410b testing by regulation. But check me on that or someone tell me I am wrong. It has been a number of years since I had a mixed union and non-union plan. The first step is to make sure the groups are included and excluded per the document and contract and move forward from there.

Yeah, the times I have seen this error we didn't put this much thought into it. We got the money moved to the correct plan. If we thought it was material there was some earnings transferred. I have to admit I don't recall any of these plans ever getting an IRS or DOL audit also. But at times the KISS Principle works.

You may have thought of this already but there are a lot of important side issues. I have had this happen before. if the first check was paid in 2025 and you reissue can you stop the 2025 1099-R? If not, will there be a 1099-R for the original check and whoever gets the new check? it seems like there shouldn't be two 1099-Rs. I know a lot of banks don't allow even the correct person endorse and deposit a check in a dead person's name so while maybe legal my guess that check can't get deposited. However, the person had the check so it is taxable income to the deceased. If no 1099-R ends up in their name that isn't going to be an issue most likely. After that it is an asset of the estate in my mind. My guess the plan needs some advice of an attorney like mentioned.

We will ask the client to ask the attorney about that provision. Thanks for your help!

It is an ESOP so it is an ERISA governed plan.

As the title says I just came across a plan document that defines a Break in Service as any year the participant works <1,000 hours. I don't recall ever seeing the number of hours being more than the <501. I have tried looking up the code and regulations and I see nothing that allows it that high number of hours. Thanks in advance.

You're just muddying the water unnecessarily. Even you admit that all the plan has to do is distribute the shares if the company wants to buy them. Or more likely the original commentor is using nontechnical language for a very technical event. Since he mentioned the putting the money into a money market more likely the company isn't actually buying the shares but recycling them within the ESOP. To most people in the ESOP and not in the industry the ESOP and company are basically interchangeable when legally they are very different. This company would have to have the most incompetent advisors to have the company buying these shares directly from the plan when there are so many ways to avoid the issue. I stand my advice you would be wasting your money to go to an attorney. Answers to non-technical people should follow the KISS principle: Keep It Simple Stupid works well. Reality does bring up a good point you could ask if they think a money market is prudent to invest your money. Or better take your funds out of the ESOP and get a better set of investments of our choosing in an IRA if you want.

I would have been in jr high (what middle school was called in the '70s for you Gen Z) when Visicalc had its day. I seem to recall the name when you bring it up but I don't think I used it ever.

I did too

I believe you can amended a plan to say anyone who worked at least one hours on or after 1/1/2025 will be on this vesting schedule (describe the new 5 year schedule). I know I have seen those types of amendments back when you were made to shorten you schedule back in the mid 2007s. Your criteria is non-discriminatory and treats anyone who have the same set of facts the same. Anyone who termed before 2025 isn't have their vesting schedule changed so you don't have to offer then anything.

At least get into the '80s and get on Lotus 123 man!

Slow reply but no you do not have to do an RMD. The shares in the ESOP do not count for ownership and if they sold before they turned 70.5/73..... there is no RMD.

We use FT Williams. We tried to help a client file a 5330 to pay the excise tax for an over contribution. FT Williams tells us the filing rejected because the form was late and money was due. They however don't give us any insight how to get the payment and filing done in the correct order. If anyone has done this successfully we could use some insights on how to do this. This was so much easier with the old paper forms.

There is nothing stopping them from using the 12/31/2024 stock price as long as it all happens on or before 12/30/2025. (Edit date from 12/20/2025 to 12/30/2025) There is nothing you can do. This is common and done all the time in this industry. The plan is on very solid ground. If you hire a lawyer you will be spending money to only lose. I would add it seems hard to know the value will 3x. But this is the reason ESOPs do what is happening. Management doesn't want to compensate former employees but want the increase to go to current employees who they see as being the primary contributors to the increase at this point.