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ESOP Plan Termination


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An ESOP Plan is in termination.  All of the assets have been distributed except for the owners, who have chosen to take their distribution in installments over 5 years.  Our understanding is that the Plan will need to file a Form 5500 each year until the assets are zero, but their attorney disagrees.  I have not been able to find anything that says otherwise.

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Ask the attorney for a citation and indemnification. As long as the trust has assets, a 5500 must be filed.  I'm not aware of any exception for ESOPs.  Now, if the stock is being distributed, the employees are exercising their put, and the employer is paying with a note, that would be a different issue.  In that case there would be no assets in the trust because the stock would have been distributed.  (It has been a while since I worked on ESOPs.  I am assuming participants still have a right to put the stock to the employer and employer's can still pay with a 5-year note. That could be old law however.)  

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Are you willing to accept 5500 instructions?

Final Return/Report

If all assets under the plan (including insurance/annuity contracts) have been distributed to the participants and beneficiaries or legally transferred to the control of another plan, and when all liabilities for which benefits may be paid under a welfare benefit plan have been satisfied, check the final return/report box in Part I, line B at the top of the Form 5500. Do not mark the final return/report box if you are reporting participants and/or assets at the end of the plan year. 


In addition, there is a similar comment in the instructions at Line 5a for both the Schedule H and the Schedule I.

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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