Stock value is $0, can shares be redeemed for $500 without discrimination?

[Guest crosseyetester]

A company went out of business and the stock has been valued at $0. They have come to this decision to redeem all allocated shares of the stock in the ESOP for $500. I don't know why. Would there be a discrimination issue? Should that $500 instead be treated as a cash contribution. Those who were not eligible would get nothing for their shares.

[A Shot in the Dark]

The $500.00 value may have something to do with the PAR Value of the stock. You would need to look at the original documentation regarding the stock issuance.

Look at all of the facts and circumstances, but if the Plan Trustees are accepting $500.00 for the redemption of employer stock that is valued at zero, the $500.00 would not be treated as an employer contribution.

[namealreadyinuse]

Search for posts on restorative payments. IMHO, they would only be are doing it to cover their fiduciary butts.