Help please with question on distribution

[Alex16]

Hello , Thanks to all for your time & knowledge in advance ...

25 year Employee of company that started an ESOP in 2007 ,  I was terminated in 2011  60 pct Vested 

Company took out 10 year 32m loan for the ESOP...Loan paid back in 2018  [11 years ]& I am expecting paperwork for first

distribution any day, distribution according to administrator will be over 5 years . 

My understanding from pamphlet from NCEO is that since I was made to wait more than 6 years for my distribution ,

I am now entitled by general rules to get a one time full sum Distribution.  Is this correct ? Where would I find the code ? 

More than 200k involved & prefer to have lump sum ...over 60 years old and on SSDI now .

Pamphlet I purchased was the Participants Guide to ESOP Distributions ...Administrator & I do not speak .

Again thanks for any direction and info I can get . 

[ESOP Guy]

I know this isn't the answer you will want to hear but they can pay in an installments.  It is rather common for ESOPs to do installments at this point for large balances. 

[Luke Bailey]

Alex16, you asked for the Code section, so here it is: IRC sec. 409(o). Of course, this is a requirement of the Code, and the plan could be more liberal, although most just follow the Code, as ESOP Guy indicates. You would need to review your plan document and SPD.

[Alex16]

ESOP Guy / Mr Bailey thanks for reply as well as your many replies and help to others , learn a lot from both your posts.

SPD is not very clear , just says 5 years for over 5000 $  nothing on all the different variables .

Understand your reply & that it’s common now for ESOPs to pay in installments for various reasons that help the company .My research showed if participant forced to wait past when there distribution should have been complete due to a loan being repaid under normal plan rules , then distributions have to start & be completed in the plan year after the loan is repaid .

my situation ,terminated in 2011 should have started to receive in 2013 and loan repaid in 2018 ....so 2019 is 8 years & from still no paperwork or 2018 statement probably goes into 2020.

I am a laymen into law & unfortunately did not make heads or tails out of code 409 did read it , but did not see or  above general rule at least in terms that I could understand . Want to be able to quote the rule in my letter to administration. 

ESOP guy , you mention NOV / Dec your busiest times helping ESOP companies with Distribution , WHY is it that companies seem to wait to last minute ? Appraisal usually done and statement sent in September in previous years ...Loan paid off Sept 2018 , obviously companies should be planning for this date . Administrator initially said paperwork would come in Aug/Sept..

Can either or both of you please explain  how this works if 5 years distribution ? Does my amount change each year with the statement share price ? Or is the Distribution amount set when first distribution commences ( including interest). Is it 5 equal portions over 5 years ?Nothing in SPD about the 6 installments over 5 years which would give me 2 distributions in first year , nor mention of pct given each years as I have found  other companies do when they distribute ....assume there is a set way funds distributed ? By Rule 

MUCH THANKS 

Alex16 

Thanks so much .in advance , my research comes for National Center For Employee Ownership brief.

 

 

 

 

 

 

 

  

[ESOP Guy]

ESOPs tend to be busy in the Oct/Nov doing the payments because they have finally gotten to the point where they can know what to pay people.  I mean some ESOPs are better than others and get their certificates out in March-May and pay in the summer months. 

 

But plenty of them get the stock price in Sept/Oct range.  They finish the annual work.  They file the tax forms by the drop dead date of 10/15 and start sending forms. 

The rule is they can hold off paying you until the year after the loan is paid.   So if it was paid in 2018 you should expect to get at least your first installment in 2019.  They have to give you 30 days to return the forms so they are almost out of time to send forms.   Since it takes time to cut the checks around the 3rd week in Nov is the absolute latest for most plans to send forms. 

 

If you don't have forms contact your former employer and make sure they have an updated address and ask when they are sending forms.   It could be as simple as a miscommunication.  It happens more than you expect with wait times to make payments going into the years after one is employed by the company. 

 

They can pay you in installments still and don't have to pay you in lump sum.  

 

Most (I emphasis most) plans the way the installment works is the first installment takes your vested balance and divides it by 5.  If your vested balance is $60k the installment is 60/5=12k.

For installment 2 they take the new balance, you should share in any stock price change for good or bad as long as your account is still in stock- they can put it into cash that is another topic- and divide by 4.  Next divide by 3.....  There are some that use more complex methods for the installments but that is most common method. 

If they aren't giving you answers when the forms will be out still let us know.  You can escalate the situation by going to the DOL or lawyering up but I caution you the most common response by a company to you doing that is they get their own lawyers.  Getting your own lawyer is very expensive.   Escalation can be counter productive if all that is going on is miscommunications.  

So once again try and get a firms answer they are sending you forms now and have your correct address.  Let us know if that doesn't seem to work. 

[Alex16]

ESOP Guy much thanks for all your knowledge ....truly apreciate all your comments .

Past statements were ususally September or October so I do think getting the valuation took time ,  Also have had to chase statements in the past.

Will ask administrator status of forms today as this 30 day rule has me concerned. Trust the company but not the administrator. Not looking to escalate the situation 

just would like what i earned and am entitled too & advised I would recieve, was told by admin that paperwoek would be in OCT last we emailed..

A. Why would I or anyone else want to be at the mercy of the Stock price each year ?...doesnt it make more sense to take a lump sum if possible.?

B When an Esop is  implemented  is there paperwork signed asking each participant if they want there benifits in a lump sum or over time ?  

C   i have the SPD as well as the entire Employee Stock Ownership Plan ...seems if they choose to they can pay in limp sum but do not have to 

Thanks Again and will keep you informed .

warmest regards

Alex16