ESOP Restore Forfeited Shares

[WhatsESUP]

Our ESOP administrator reinstates shares for those rehired participants that terminated employment with a 0% vested balance. There is no time limitation for reinstatement.

It was my understanding that if a participant terminated employment 0% vested the terminatino date was considered a distribution and the 5 year Break in service rule calculation would start.

Is there a limitation on reinstatement for 0% vested rehires?

The plan doc does provide language for partially vested balances reinstated within the 5 year break in service for those that return the vested shares. 

 

[GMK]

Check the Distribution of Partially Vested Accounts and Restoration section in the Vesting article of the Plan Doc.

A quick reading of ours seems to say that if the received or deemed distribution is less than 100% of the total account balance (which would include 0% vested Participants), then the 5 One-Year Breaks in Service clock starts ticking.

[JRN]

If the former participant is rehired after incurring five consecutive one-year breaks-in-service, then the forfeiture is not required to be restored.

[CDL]

Can rehired employees reclaim previous ESOP shares if they left before vested?
 

Are shares forfeited when the employee leaves, or is there a time frame the employee can be rehired and have their shares reinstated? The five year break in service seems to read that it’s for reinstating previously earned time but not previously earned shares. 

[ESOP Guy]

34 minutes ago, CDL said:

Can rehired employees reclaim previous ESOP shares if they left before vested?
 

Are shares forfeited when the employee leaves, or is there a time frame the employee can be rehired and have their shares reinstated? The five year break in service seems to read that it’s for reinstating previously earned time but not previously earned shares. 

When shares are forfeited and when they are restored is governed by the plan document.  There is a window for forfeited shares to be reinstated.  

The 5 One Year Break in Service rules does apply to forfeiture restores.   If you are a participant in a plan talk to your Plan Administrator for full details.    If you are the Plan Administrator you need to read your document carefully.   The rules for this are always in the document.