laws, rules or guidelines for payment of earned and acrued ESOP funds to terminated employees

[Guest YI3KITY5ALS2]

Background: My position was eliminated and I was fired 2 years ago from a company with an ESOP. It is my understanding that a terminated employee cannot receive any payment from his or her ESOP account until 5 years after that employee's date of termination. Prior to my termination date the company purchased certificates of deposit for departing employees. These CDs were for the full amount of the departing employee's acrued ESOP account. For example: If a terminated employee had an acrued total of $25,000.00 in his or her ESOP account the company would purchase a certificate of deposit in that person's name for $25,000.00 shortly after the employee's departure. After the required 5 year waiting period the terminated employee could cash in the CD and have control of the full $25,000.00 plus any earned interest. The company discontinued this practice shortly before I was fired. At present the fate and amount of the total in my ESOP account depends entirely on the performance of the company. If the company does well, my ESOP account is safe. If it fails, my ESOP account becomes a fond memory. Since my departure the company has fired 3 very high level people (a president, a vice president and the highest level manager) who are supposedly subject to the same ESOP laws and rules as all employees. The amount of money acrued in their ESOP accounts and owed to these 3 former employees is undoubtedly very substantial.

Here are my questions: 1.) Is there a law that would prevent the company from purchasing CDs for the 3 high level ex-employees, thus securing the full amounts in their ESOP accounts, while denying the same privilege and opportunity to me and other lower level terminated employees? 2.) Is there a law that would enable me to determine whether or not this has occurred?

[stephen]

1) Yes, if the three employees you mention are Highly Compensated Employees (earned more than 90,000 in 2004 or owned more than 5% of the stock of the company (not including their ESOP account)) it would be discriminatory for the company to convert their balances to CD's without doing the same for others.

2) I do not know of any law that would give you access to what is happening to the accounts of others in the plan.

I suggest you review your Summary Plan Description and request a current version of the Distribution Policy of your ESOP from the Human Resource Director (or other contact at the company) for more information regarding what will happen to your account.