Sale of Stock in Profit Sharing Plan to ESOP

[Guest Edward McElroy]

A company maintains both a profit sharing plan and an ESOP. The profit sharing plan trustee is considerinf selling the stock to the ESOP. The company has a current valuation. Is this a prohibited transaction? Any thoughts? Thanks. Ed

[QDROphile]

Your first step is to determine whether one plan is a disqualifed person or party in interest with respect to the other. The answer probably hinges on how much stock of the employer is owned by each of the plans. If no party in interest or disqualified person, no prohibited transaction. No one can do a prohibited transaction analysis without all of the facts, and the analysis is often quite intricate.

But there are also other issues to consider. For example, the fiduciaries of the plans may not be prudent in simply using a "current valuation." Who prepared the valuation and for what purpose?