Distribution of Cash or Stock / Rollover Issues

[Guest Suanne]

If the employer's corporate charter or bylaws restrict the ownership of substantially all outstanding employer securities to employees or the ESOP, can the corporation purchase the securities which are allocated to the terminated participant?

If stock is distributed, and a put option is exercised, can the participant roll over to an IRA the cash that the employer pays to purchase the securities?

[RLL]

Suanne ---

The company may purchase the shares from the ESOP, but only for cash at a price not less than fair market value as of the purchase date (assuming that the ESOP fiduciary agrees to sell the shares). This may require that the independent appraiser's opinion be updated from the year-end valuation.

If the stock is distributed and then repurchased by the company from the distributee, the distributee may rollover sale proceeds to an IRA within 60 days of the distribution date (if the distribution was an "eligible rollover distribution"). This could be a problem if the company repurchases the shares on an "installment" basis.