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

April 3, 2009

Stock Bonus Plan

Your Guide

Print

Definition

An employer-sponsored qualified-retirement-plan established by an employer for the benefit of his employees and their beneficiaries.
Stock bonus plans are defined contribution plans, funded with employer contributions, but can include a 401(k) feature.
Contributions to Stock bonus plans are usually discretionary, i.e. the employer can chose whether to fund the plan on a year to year basis. However, some plans are designed to allow the employer to choose whether it wants to adopt a mandatory-contribution feature in the plan
Earnings in a Stock bonus plan accrue on a tax-deferred basis. Contributions and earnings are taxable to the participant when withdrawn from the participant’s Stock bonus account
Referring Cite
IRC § 401(a)(23); Treas. Reg. §§ 1.401-1(a)(2)(iii) and 1.401-1(b)(1)(iii)
Additional Helpful Information
  • A stock bonus plan must meet certain requirements, which includes the following (Certain exceptions apply: see IRC § 409 (h) ):
    • A participant who is entitled to a distribution from the plan must have a right to demand that his benefits be distributed in the form of employer securities, and if the employer securities are not readily tradable on an established market, the participant must be given the right to require that the employer repurchase them under a fair valuation formula.
    • The employer must provide a put option for a period of at least 60 days following the date of distribution of stock of the employer and, if the put option is not exercised within such 60-day period, for an additional period of at least 60 days in the following plan year
  • In certain circumstances, the term “employer securities” shall include any securities of the employer held by the plan.
More

Keep Learning

Domestic abuse distribution

A domestic abuse distribution is one that is made to domestic abuse victim, during the 1-year period beginning on any date on which the individual

Eligible retirement plan

The term “eligible retirement plan”, means a retirement plan to which a rollover contribution can be made. These are: (i)an individual retirement account described in

Qualified See-Through Trust beneficiary

Definition A qualified trust beneficiary is a trust that satisfies the requirements so as to be treated as a designated beneficiary.   For retirement accounts inherited

Saver’s Credit

Definition Also known as the Saver’s Tax Credit: Nonrefundable tax credit available to eligible individuals who make contributions to their retirement account. The saver’s credit

Be among the first to know when

IRA Rules
Change