Need ESOP plan Documents

[Guest Babs]

I am putting together an ESOP plan and I would really like to have several sets of the plan documents and trusts so that I can study them as I put together my set of documents. for some reason, everyone seems to feel that their documents need to be hidden, but I promise confidentiality, I just want the documents to judge writing style and format and maybe to borrow a paragraph or two as I put my documents together. I just want to be able to see how different people are addressing ESOP issues and then put together my own style and format of documents. Please send ESOP documents by E-mail to me at Babs474@Cloudnet.com Otherwise, is there a good public source? Where? Thank you very, very much -- you are really being a godsend.

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Babs

[Guest ESOPwizard]

<< for some reason, everyone seems to feel that their documents need to be

hidden, ... and maybe to borrow a paragraph or two...>>

Some people spend a lot of time and effort keeping their documents up to date with an expectation of being able to receive a financial return for their efforts.

[Kirk Maldonado]

There is a sample ESOP plan document in Tax Management Portfolio 354 (ESOPs). I seem to recall that there is a sample one in the CCH Pension Plan Guide. There might also be one in the RIA Pension Coordinator.

You could also check with The ESOP Association (in Washington, D.C.) and with the National Center for Employee Ownership (in Northern California).

[RLL]

Babs.....I think you should know that a "do-it-yourself" ESOP can be dangerous to the health and the well-being of you and your company.

[Kirk Maldonado]

I concur in RLL's admonition. ESOPs are not for novices. In addition to all of the esoteri ESOP rules, you also have a multitude of interdiscplinary issues, such as valuation, securities laws, and accounting rules.

This is one of the few reasons why there are so few ESOPs; there are so many special rules for ESOPs that it makes no sense to learn them unless you are going to do them all the time. For example, there is a very same cadre of attorneys that do them on a regular basis.

If you are masochistic enough to still want to do an ESOP, you might want to read two of my publications -- Tax Management Portfolio, #362, Securities Laws Aspects of Employee Benefit Plans and Employee Stock Ownership Plans, Chapter 50 of the Employee Benefits Handbookd (Warren, Gorham & Lamont).

In any event, I would not recommend you implementing an ESOP without retaining the services of a competent securities lawyer that is knowledgeable about the laws of the state in which the employer is located.

[Guest ptpnthr]

Kirk:

Your reply below (above when you read this) is great. Do you have any later publications you can recommend, or are you long since out of the ESOP world? I'm looking for a checklist to follow when setting up an ESOP. I think I have everything, but I like to double check and triple check based on the wisdom of others.

[RLL]

ptpnthr ---

Check with The ESOP Association at www.esopassociation.org , the National Center for Employee Ownership at www.nceo.org , and the Beyster Institute at www.beysterinstitute.org .

[Kirk Maldonado]

I sincerely doubt that you will find a checklist. So few ESOPs are set up that I doubt that there is much demand for them. Also, most of the ESOPs that are implemented are done by a small cadre of ESOP practitioners, who don't need a checklist because they use their own documents.

But in any event, if you are going to do an ESOP, I strongly recommend you to do all of the necessary reading. You can develop your own checklist. That way you won't have any liability for any omissions on somebody else's checklist.

One thing that you will quickly learn that there is a very good reason why only a small number of practitioners do ESOP work; most people avoid getting involved in them. The reason for that is the learning curve is so horrendous that it makes no sense to learn all that you need to do the work competently. Stated in a slightly different fashion, it makes no sense from a cost/benefit analysis to do just one of them.

On the other hand, if you see yourself doing more of them in the future, then learning all about ESOPs could prove to be a good investment of your time, because you would be one of the few knowledgeable individuals. There are a lot of cross-referals in the ESOP community, so that developing a reputation as an ESOP expert could provide you with some more work.

While there is a lot to learn, (I think that) they are fun transactions to work on. They are very different than the implementation of a standard 401(k) plan or defined benefit plan; involving much more work and generating more fees.

Unfortunately, both the IRS and the DOL have indicated that they plan to step up their audits of ESOPs. Thus, the odds of an IRS or DOL audit may be much more (at least in the future) than the odds of a "regular" plan being audited. Furthermore, a disproportionate amount of ERISA litigation involves ESOPs. Because of these factors, there is the chance that your work may be subject to fairly intense scrutiny.