Cite for 5500/plan participant liability

[Tax Cowboy]

Group:

Clients TPA files 5500 annually for their ESOP.

Assume the 5500 shows plan assets of $200k.

Isn't this the liability owed to participants? 

Is there an Internal Revenue Code/Dept of Labor/ERISA cite/support that says the repurchase obligation is borne on plan sponsor?

in other words, I know the employer/client/plan sponsor ultimately has liability to pay for that repurchase obligation but I'm looking for a regulatory cite/IRC/other to support this statement.

Thoughts and comments appreciated.

Best, Joe Dadich, Esq.

[ESOP Guy]

Maybe I am not understanding the question.  But if a 401(k) plan has $200,000 in assets are they a liability to the participants also?  

The assets in retirement plans are going to be paid to the participant at some point. 

So are you asking if the repurchase liability ought to be shown on the 5500?  No it shouldn't shown on the 5500 for the same reason you don't show a liability on the 5500 for a 401(k) plan knowing all the balances will be paid some day. 

Or are you just looking for Internal Revenue Code Section 409(h) which says a non-publicly traded ESOP the sponsor has to provide a market for the stock?

https://www.law.cornell.edu/uscode/text/26/409

I quote:

(h) Right to demand employer securities; put option

(1) In generalA plan meets the requirements of this subsection if a participant who is entitled to a distribution from the plan—

(A) has a right to demand that his benefits be distributed in the form of employer securities, and

(B) if the employer securities are not readily tradable on an established market, has a right to require that the employer repurchase employer securities under a fair valuation formula.

 

If I am not answering the question let me know and maybe clarify.  

 

This might help???

 

https://www.nceo.org/esop-repurchase-obligation-insights/c/overview-esop-repurchase-obligations

[Griswold]

I think you're looking for IRC 409(h)(1)(B):

(h)Right to demand employer securities; put option

(1)In general A plan meets the requirements of this subsection if a participant who is entitled to a distribution from the plan—

(A)

has a right to demand that his benefits be distributed in the form of employer securities, and

(B)

if the employer securities are not readily tradable on an established market, has a right to require that the employer repurchase employer securities under a fair valuation formula.

[Tax Cowboy]

That is exactly what I'm looking for!

Thank you.

Best,

Joe