Author Topic: ESOP distribution rules  (Read 1947 times)

starlight

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ESOP distribution rules
« on: May 31, 2015, 05:43:32 PM »
Hello,

I wonder if anyone out there has experience or knowledge on how employee stock from an ESOP is distributed?  I have a dear friend who needs to plan for retirement, has a significant amount of money in the ESOP program, yet hasn't been given the definitive rules on distribution. 

She automatically receives a percentage of her salary in company stock every year, but has heard she'll have to wait 5 years after leaving the employer to access the funds, and only 250K at a time (perhaps every year, I have no idea). 

She doesn't know if age is a factor.  What if she is 60 will she still have to wait 5 years for the payout?

Does this sound reasonable?  Does her employer get to make up rules or do they need to follow some federal guidelines? 

She doesn't plan on leaving the company for another 13 years or so, but doesn't want to ask, as they may think she's planning to jump ship sooner than 65 years of age. 

Anyone out there with knowledge on this subject?

 

MDM

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Re: ESOP distribution rules
« Reply #1 on: May 31, 2015, 07:52:40 PM »
I know enough to know that the plans can vary from company to company.

She should ask for the Summary Plan Description.  See https://www.nceo.org/articles/rights-esop-participants.

starlight

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Re: ESOP distribution rules
« Reply #2 on: May 31, 2015, 09:08:34 PM »
MDM,

Thank you for your reply, I'll pass that on to her.

jda1984

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Re: ESOP distribution rules
« Reply #3 on: June 01, 2015, 06:50:09 AM »
To go a bit further on MDM's response, yes they vary from company to company, but there is some documentation as to the rules for that company.  Each company needs to comply with some federal regulations, which are pretty favorable to the company from my view.  For example, I believe the longest they can wait to pay out distributions after leaving prior to normal retirement age (again defined specifically for that company's plan, but not to exceed some federal number) is six years unless there is a loan to purchase more stock which has not been paid back.

The National Center for Employee Ownership (NCEO) has a lot of good resources at www.nceo.org