ESOP Diversification

[Guest imthatguy]

How is the value of employer stock calculated during diversification? Specifically for a publicly traded plan using internal accounting and not necessarily going out to market. Is it the price/value as of the last day of the plan year? Or is it based on the day the diversification is completed?

I know the 25% - 50% limits, but am not sure about the dollar value assigned. Any help is appreciated!!!

[RLL]

How is the value of employer stock calculated during diversification? Specifically for a publicly traded plan using internal accounting and not necessarily going out to market. Is it the price/value as of the last day of the plan year? Or is it based on the day the diversification is completed?

I know the 25% - 50% limits, but am not sure about the dollar value assigned. Any help is appreciated!!!

If diversification is effected by distributing shares to the participant or transferring shares to a 401(k) plan, there is no need to value the shares. If the shares are sold to provide cash for diversification, there also is no need to value the shares.

If the publicly-traded shares are converted into cash within the ESOP (without a sale, etc.), the plan document should specify the date as of which the value is determined. It seems that the year-end value is not appropriate if diversification is effected 3-6 months after year-end, when there may have been a meaningful change in value since year-end. A current value should be used when the shares are publicly-traded.

[Guest imthatguy]

Thank you for the reply, I appreciate it.

One last question, do I need to worry about any SEC filings for owners diversification within an ESOP? Keeping in mind that we are NOT going out to market, instead allocating the diversified shares to cash from the participants not diversifying.