What is required and allowed when distributing company stock from an E

[John A]

An ESOP allows a distribution of company stock. What information is required from the participant in order to make this election? What options does the participant have (can the participant have the stock certificates mailed to a rollover institution)? Is there anything else that should be considered when distributing company stock from an ESOP?

[RLL]

Hi John A ---

The area of ESOP benefit distributions can be somewhat complicated. If the company stock is publicly-traded, it's usually an easier process. If not, the distributee of closely-held company stock must be granted a put option, allowing the sale of shares back to the company. There may also be a "cash distribution" option in the ESOP.

In addition, if the participant's ESOP balance is more than $5000, he/she must give written consent to receive a distribution prior to retirement age. Also, the distribution likely is a qualifying rollover distribution...which involves written notices and elections. The tax consequences of the ESOP distribution to the distributee will vary depending on whether it's a lump sum distribution and whether it includes company stock.

I recommend that you seek specific advice from an adviser who is very experienced in ESOP benefit distribution matters.