Definition of Stock Bonus Plan

[Dawn Hafner]

The definition of a stock bonus plan is a defined contribution plan under which benefits are distributable in employer stock. Treas. Reg. -(B)(iii)1. An ESOP may be a stock bonus plan, or a stock bonus plan and money purchase plan. See IRC §4975(e)(7).

My question is are S corp ESOPs and C corp ESOPs that do not distribute in stock due to bylaw restrictions still considered "stock bonus plans"?

It is necessary to know when preparing the 5500, and the actual definition of a stock bonus plan seems to be contrary to these type of ESOPs.

Thanks.

[RLL]

Hi Dawn ---

Any ESOP under IRC section 4975(e)(7), including an S corporation ESOP, must be a stock bonus plan (or a combination stock bonus-money purchase plan) qualified under section 401(a). The regulation that you cited was adopted long before sections 401(a)(23) and 409(h)(2) were added to the IRC and is obsolete to the extent that it conflicts with such provisions.