"Employer (bank) has limited amount of company stock (bancshares) in a 401k plan. About half the outstanding share are attributable to term vested participants. They have a written procedure for the handling of bancshares that allows terminated or active employees to sell shares, active employees are notified of the shares for sale and shares are sold on a first come first serve basis. Term vested participants also have the option of
an in-kind transfer to a self directed IRA where they would have the option to sell to other non-401k individuals through the bank's trust department. Another wrinkle in the written procedures, If there are no active 401k plan buyers of the company stock at the time an active or terminated participant offers up the shares for sale, the active employees also have the option of rolling out the company shares to a self directed IRA where
they can either hold it and roll it back into the 401k at a later time or they can sell to an outside individual within that SD IRA. Active employees are offered a 1 week period to buy any shares offered up for sale. Per the CEO, they have always let all other employees have the first opportunity to buy shares and if they shares or portion of shares remains unpurchased at the end of the 1 week offering period, the CEO or other officers have
stepped in an bought the outstanding shares available....
"These bancshares were a relic from years past before they established an ESOP. Prior to the ESOP, the 401k plan offered a match that allowed employer securities to be purchased through those matching dollars. I have concerns that the exchange of bancshares currently are being acquired by participants that have only ever had employee deferrals and no matching dollars (i.e.
security law issues as noted in other benefitslink posts). Thoughts on this?
"The employer wants to find a way to get the bancshares out of the 401k plan but currently isn't in a position to raise the capital necessary to buy out all the shares in the 401k plan. Assuming we address the document issue that does not allow for in-service distributions of these bancshares or more specifically matching contributions, the employer
asked the following question: "If they offer a free (no service fees) lifetime SD IRA to all employees (active or term vested) to roll their bancshares out of the 401k plan, if majority of the employees took them up on that offer, they could probably raise the capital to buy out the remaining (if any). Is that a possible solution?"
"This would only impact about 40 of the roughly 100 participants in the plan. My first
concern is the incentive to rollout the bancshares, does the incentive being offered by the bank for the free SD IRA become a benefits, right and feature they would need to offer to all employees of the 401k plan?"
