Save time with our cheat sheets, fact sheets, checklists & books!

April 2, 2009

Employee Stock Ownership Plan (ESOP)

Print

Definition

A defined contribution plan for which the primary investments are employer stocks (stocks of the employer that sponsors the plan).
In order to be treated as an Employee Stock Ownership Plan (ESOP) under the tax code, the plan must meet certain requirements, including the following:
The plan must be formally designated as an ESOP in the plan document.
The plan must specifically state that it is designed to invest primarily in qualifying employer securities. As such, a money purchase pension plan or a stock bonus plan constituting an ESOP may invest part of its assets in other assets ( other than qualifying employer securities).
Referring Cite
ERISA §407(d)(6)(A) , IRC §401(a)
Additional Helpful Information


An ESOP can be part of a defined contribution plan (other than an ESOP)
If an existing defined contribution plan is converted to an ESOP, the fiduciary and exclusive-benefit rules apply to the conversion.
According to 28 CFR 2550.407d-6, a plan constitutes an ESOP for a plan year, only if it meets other such requirements as the Secretary of the Treasury may prescribe by regulation under IRC§ 4975(e)(7)

 

More

Keep Learning

Applicable RMD Age

Applicable RMD Age The first year for which an IRA owner or plan participant must begin to take RMDs from their tax-deferred retirement account. RMDs

SIMPLE 401(k) Plan

Definition A SIMPLE 401(k) plan is a 401(k) plan established by a small business for it’s employees. Earnings accrue on a tax-deferred basis and distributions

Required Minimum Distribution (RMD)

Definition The minimum amount that must be withdrawn from retirement accounts, including qualified plans, 403(b) accounts, 457(b) accounts or IRAs, each year.  For retirement account

Required beginning date (RBD)

Definition The date by which a retirement account owner must begin distributing required minimum distribution (RMD) amounts from a Traditional,  SEP or SIMPLE IRA, a

Be among the first to know when

IRA Rules
Change