bkidd

No, there is not enough cash flow from operations to fund the distributions..so, the Company sells assets, then has the cash to pay the retirees.. The ESOP owns 100% of the Company...we don't feel taking stock out of the ESOP is anti-dilutive...so, if the asset values stay the same from year to year, the assets go down by the same amount as equity distributions..and therefore, it theoretically shouldn't impact the remaining participants.

that's very helpful thought and something to consider...thx so much for your quick response! greatly appreciate it!

If our circumstance is correct, then that means a company would have to buy back all of the stock before the "freeze" to take a tax deduction...that doesn't make sense since most companies don't have that type of liquidity all in one swoop... And I've never heard of ESOP plans having huge tax liabilities...Since we are selling assets to pay the retirees, the large tax consequences actually dilutes the other participants tremendously... Hopefully our position in the past is misinformed

yes, C corp...the plan has been frozen for close to 10 yrs and probably about 1/2 of our top mgmt are "frozen" out of the plan since they are relatively new..and it still has 10,000 plus participants, so it may pass the test...but, we def don't won't new employees in the plan We're tracking down 2 attorney's we've worked with in the past, but time is of the essence and it doesn't need to be 2 weeks from now so I was just curious...

Maybe that's a better question..if the plan is truly frozen, could we open up the plan to allow contributions to fund retiree distributions, but still not allow new participants to enter the plan? We don't won't to open the plan to new participants.

Correct ESOP Guy...to my knowledge, all it has meant is that no new employees can enter the plan...So, no new employees entering the plan and distributions are being paid out annually to retirees, etc. that's the primary activity. Somewhat hesitant to re-open due to dilution of current participants since the assets are not growing and the Company is not interested in putting additional assets into the plan.

New to the board and not an ESOP person...lol My company has a frozen ESOP plan and since it's been frozen we have been paying the retirees by buying back the company's stock annually and have been retiring the Company stock at that time...since it's an equity transaction within the Company (and not the ESOP), we haven't been taking a tax deduction for this "contribution". We were told at some point in time that the ESOP couldn't make a "contribution" to the ESOP since it was frozen, so we have been retiring the stock. So, my question, is this. Although our plan is frozen, can our Company still make a contribution of cash to the ESOP to pay the retirees? Therefore, we would take a tax deduction and the shares the ESOP bought back I assume will be re-allocated (and not retired) among the remaining participants. Any thoughts would be greatly appreciated. Is so, is there some authoritative guidance you can provide that I can reference that would be great... We are now out of NOL carryforwards and it doesn't make sense that, although frozen, a Company paying retirees can't contribute cash to the ESOP to pay retirees and take a tax deduction....We are generating a sizable taxable gain due to selling assets to pay the retirees..so our past position doesn't make any sense to me... Thanks so much for your help and expertise.