ESOP Guy

Sorry for slow response. There is no ESOP specific exception.

Prior discussions on the topic. It really depends on the typic of document. However, we keep documents forever. It doesn't come up very often but now and then being able to determine how things should have worked back in the day is needed. And as you can read proof a person's benefits have been computed correctly and/or paid is pretty much forever.

You are correct the term "W-2 contractor" is a contradiction. Independent contractors have their income reported via a 1099 and employees have their income reported via a W-2. Also, this isn't something that is negotiated or decided or agreed upon. There are objective tests to determine if a person is an employee or independent contractor. The tests can be as clear as mud at times but hard to determine isn't the same thing as people get to just pick. My guess if these people had their income reported via a W-2 the company is stuck treating them as employees at this point but wcc is correct first the company needs to figure out if these people are employees or not. That determination isn't the TPA's job.

Don't forget to look at the promissory note. Back when I did 401(k) work and ESOP work our standard promissory note we gave clients to use this trigger for payment upon termination was in the note. It was a matter of contract law not Qualified Plan law that it happened. The participant agreed to the term when they signed the note.

Are you willing to share the industry you work in? If they are holding the cash after you have been segregated out of the stock it typically means they want to slow down your ability to use your ESOP funds to open your own business that competes with them. You see this with certain types of engineering and IT firms mostly as the primary asset in those business is really the skill of the people. So if you leave, and your in this kind of field, you take your knowledge with you and only need enough funds to pay your bills until you have built your company up. You can see how slowing your ability to get the funds can put a damper on this. Harsh but true at time that is why companies show down the payment. I once helped a company that was a lawn service that included landscape design and its own small farm to raise trees.... They put a 5 year delay even if the person was put into cash because they got tired of guys leaving in the fall, cashing out and by the following spring had taken the money to buy a truck a few lawn mowers and trimmers. The guy was calling up the clients he used to service offering to cut their grass for less than his old employer. Management said "enough of funding out competition every fall". They put a 5 year hold on the distributions. Like I noted before the other reason can be if the stock price has done very well slowing down the payment can slow down the number of ESOP millionaires in their 50s to early 60s deciding they can retire early. Once again a bit cold but true. The above are the two biggest reasons for holding a person's all cash account in an ESOP. It is more philosophical than anything else. It will be hard to get those answers from them for obvious reasons. It will most likely be said a different way. Your problem is holding the fund for years like you describe is all legal choices on the company's part. You can ask and pester them but there is no fighting and winning on this topic.

Add me to the voice your firm is doing too much work and opining on things it shouldn't. We do not normally get and wouldn't look at if we got the divorce degree. Our job is to determine if the DRO is a QDRO. We are not domestic relationship lawyer and we have no interest in getting between to spouses in the process of ending their marriage.

Add my voice to walk away. Some revenue isn't worth the cost of dealing with their issues and attitude of not care about small things like the law.

See my replies above in red. There are just a lot of questions and that seems easier. Hope this helps.

Just to be clear who is a W-2 employee verses a 1099 contractor isn't something that you just decide and I mean by anyone. There are objective tests to determine if a person is an employee or not. Not that is the TPA's problem but this we just decided means they are most likely ignoring the law.

I 2nd this opinion. They have the 1,000 hours while the plan was frozen and they count. This person enters upon rehire.

Yup seen this also. And this meets the rules that Peter quotes in my mind. If the return was filed after the original due date and there is an extension the contribution was made by the extended due date. The extended due date of the return does't change just because the return was filed before the last day of the extension.

A big part of the difficulty is the note has to be secured. What asset is the company willing to have a lien put on it to secure it? Would a lien on an asset violate other loan covenants the company has? They can get a bank to agree to make the note good but if the company could do that they are most likely in good enough cash position to just pay the person cash. See my prior comment for ideas I would track down before spending too much time on this idea.

I haven't seen this done in decades. It is pretty difficult to do all legally correct is part of the problem. If the company is having cash flow problems regarding paying benefits and the repurchase obligation they need to find a firm that is good at repurchase obligation studies and work on a plan. ESOPs have more flexibility to change their distribution rules and policy than most types of plans in regards to protected benefits. This is an area where a good TPA and ERISA attorney that knows ESOPs can really help with the planning. It tends to be money worth spending.

Congrats on retirement. I would assume most people on a forum like this know about this IRS table with all the limits going back 1989. chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.irs.gov/pub/irs-tege/cola-table.pdf

We do help our clients look for lost people who need an RMD as no one likes an uncashed check hanging on the books. We don't do it until very close to the RMD date or if the check really does go uncashed.