company sale and KSOP

[eilano]

Company currently sponsors a KSOP and is in the process of being sold. Company stock in plan will go away after the sale. As long as the stock is sold at the current fair market value, there is no problem replacing the stock with cash in the plan correct?

[QDROphile]

What do you do about the plan provsion, arising out of the ESOP requirments, that says the participants have the right to receive a distribution of company stock?

[mbozek]

Is the plan sponsor being sold for cash in exchange for all of the outstanding stock held by the KSop? I dont understand the relevance of "as long as stock is sold at the current fair market value, there is no problem..." Distributions of cash will be taxed at ordinary income tax rates instead of 5/15% capitial gains rates if the participants receive a distribution of stock.

[eilano]

The participants will not receive distributions. The stock will be sold.

[mbozek]

If the stock is redeemed for cash the participants will receive a distribution of cash upon termination of the plan. The cash can be rolled over to another plan or to an IRA. I am assuming that all plan terms willl be complied with, including an appraisal of the stock

[QDROphile]

Perhaps it should be taken for granted, but nothing in the post says that the plan is terminating in connection with the transaction or that the plan will be amended to deal with the current express requirements under plan terms with respect to employer securities. If the plan is not terminating or being amended appropriately, you can't simply stop at exchanging the stock for cash. Acquisition of the company does not effectively kill the ESOP or allow the ESOP requirements to be disregarded.

[mbozek]

If the stock of the company in which the esop holds is sold and shares are exchanged for cash then the Plan will no longer be able to make a distributon in shares. Obviously the plan will have to be amended to take into account the fact that participants will will not be able to receive a distributon in employer shares after they are exchanged for cash.