Creating a Sustainable ESOP Distribution Policy

by Corey Rosen, Barbara Clough, Michael Fischer

Managing how and when employees get distributions from their ESOP accounts is a critical strategic issue for an ESOP company. Too often, companies simply follow the distribution and diversification policies established when the ESOP was created. That policy often calls for shares to be distributed only after termination and on the slowest schedule allowable. Similarly, employees often cannot begin to diversify their accounts until they have reached the statutorily required age and participation minimums. This is the right approach for some companies, but it creates avoidable problems for others.

ESOP companies should periodically review their distribution and diversification policies with their advisors. Among the options to evaluate are paying distributions out sooner than legally required, providing for earlier diversification than required, in-service distributions, account segregation, account rebalancing, and mandatory diversification for those reaching a certain age. This book explains the issues and the choices to consider.

64 pages, Paperback

Published February 28, 2025