New ESOP Contribution Question

[Guest svatty]

If a company is establishing a new ESOP (with plan year and Company fiscal year end of June 30) is there a requirement somewhere (I swear I read one and it may be a Tax Credit Employee Stock Ownership Plan requirement) that would require the trust to be funded PRIOR to the time required by 404(a)?

Any help would be greatly appreciated.

Thanks

[RLL]

No.

[M R Bernardin]

Perhaps you are thinking about the rule that a qualified trust must be a valid trust under state law, and that most if not all states require a trust corpus in order for it to be valid. This mix led many to believe that in order to establish a qualified trust for a plan year, there had to be at least a nominal deposit by the end of the first plan year. The IRS announced at some point that a trust will be considered a qualified trust for a year if it is a valid trust under state law other than a state law requirement that the trust have a corpus. So, no deposit need be made until the 404(a) deadline.