Is an ESOP loan with a term of 30, 60 or even 90 years reasonable?

[Guest SCUDDESLER]

As I recall, the terms of an ESOP loan are held to a general standard of reasonableness. Assuming all of the other components of the loan are reasonable, is an ESOP loan with a term of 30, 60, 90 years reasonable? Is there a general consensus as to when the repayment term of a loan becomes unreasonable?

Thank you very much for your assistance.

[Guest eafredel]

A loan must be structured to fulfill the requirements for an "exempt loan" under Section 4975 of the Code. The terms of the loan must be at least as favorable to the ESOP as the terms of a comparable loan resulting from arms length negotation between independent parties. Fifteen years is pretty standard. Beyond that, the question is whether the loan would provide for meaningful allocations of stock to the ESOP participants as the loan is repaid. You also might want to look at the DOL Field Bulletin on ESOP loan refinancings.