Leveraged ESOP

[Guest Sharon G.]

In a leveraged ESOP, can participants' cash accounts, resulting from prior years' cash contributions in excess of the contributions required to make the loan repayments, be used to pay down the ESOP loan?

[RLL]

Hi Sharon G. ---

Reg. section 54.4975-7(B)(5), relating to ESOP loans, limits the ESOP assets that may be used for loan payments....and only contributions "that are made under an ESOP to meet its obligations under the loan" may be so used.

Unless those prior years' "excess" contributions were made to enable the ESOP to make loan payments, the amounts now attributable to participants' cash accounts may not be so used.