ESOP

[Guest RetirementConsultant]

Hello,

What does it mean when ESOP assets are non-transferable? Can it be rolled over to an IRA? Distributed from the ESOP and sold in a brokerage account?

Thanks

[BeckyMiller]

In what context have you encountered the term "nontransferable?" That would help in answering your question. When it comes to the ESOP's holding of stock, the shares are plan assets subject to the general rules for plan assets. If the plan permits distributions in stock and the stock is not publicly traded, the participant gets a put option to the company. The company may impose a very limited right of first refusal on the participant. For publicly traded securities on an active market, the stock would have no restrictions upon distribution for most participants.

[Guest RetirementConsultant]

Thanks Becky,

The client’s statement identifies the employer stocks as non-transferrable. And we are trying to determine if that means if he cannot take an in-kind distribution of those stocks and subsequently liquidate the stocks so as to get the NUA treatment.

[BeckyMiller]

Ah - I bet this is a private company whose shares include some kind of general restriction on transfer so they don't get in trouble with securities law issues. If you look at IRC Reg. 54.4975-11 you will not see any prohibition for these stock legends that have these kinds of restrictions on them that apply to all shareholders inside or outside the ESOP. BUT, I am guessing here, so I suggest that you talk to the client or their counsel to determine the nature of the transfer restriction.