Employee Stock Ownership Plans (ESOPs)
An employee stock ownership plan (ESOP) is an IRC section 401(a) qualified defined contribution plan that is a stock bonus plan or a stock bonus/ money purchase plan. An ESOP must be designed to invest primarily in qualifying employer securities as defined by IRC section
- Form 5300 Applications for Employee Stock Ownership Plans
Explains changed procedures for reviewing Form 5300 ESOP determination letter applications during cycles C-E and a worksheet to review ESOPs in their initial review stage. Plan sponsors and practitioners may use the worksheet as a tool to design ESOP plan documents.
- Response to Technical Assistance Request #1 (Nov. 3. 2009)
Concludes that ESOP provisions providing for a distribution of stock is subject to immediate, mandatory resale are consistent with IRC section 409(h).
- Response to Technical Assistance Request #2 (Nov. 3, 2009)
Discusses plan language defining “qualified participant” under IRC section 401(a)(28)(B)(iii).
- Response to Technical Assistance Request #3 (Dec. 9, 2009)
Discusses the required timing and substance of IRC section 409(p) amendments.
- Response to Technical Assistance Request #4 (Feb. 23, 2010)
Discusses qualification issues presented by plan provisions concerning the mandatory transfer of employer securities to and from participant plan accounts.
- Response to Technical Assistance Request #5 (October 8, 2010)
Discusses qualification issues presented by plan provisions concerning the mandatory transfer of employer securities to and from participant plan accounts designed to prevent the occurrence of a nonallocation year (within the meaning of IRC section 409(p)(3)).
For questions concerning the effect of Revenue Procedure 2012-06 on Response #5, for ESOPs with reshuffling provisions designed to prevent a failure under IRC section 409(p), contact Robert.E.Gertner@irs.gov.
- Final Regulations on Investment Diversification Requirements
Final IRC section 401(a)(35) regulations for certain defined contribution plans with publicly traded employer securities.
- S corporation stock held by an ESOP - deductions
An ESOP-owned S corporation cannot deduct retirement plan contributions for ESOP participants.
- ESOPs – Definition of readily tradable employer securities
- Employee Stock Ownership Plans –Anti-Cutback Relief
Notice 2013-17 offers relief for certain ESOP amendments that eliminate a distribution option to meet new diversification requirements.