Find Your Resource

Our company is a 100% S ESOP. We have contributed more than the Section 415 limit for our ESOP and 401(k). Are we exempt from excise taxes because we are a 100% S ESOP?

Q: We are considering funding our ESOP in part with cash reserves we already have. Can we loan these to the ESOP trust in the same way a bank or other lender would?

Q: We have a new ESOP and have heard about all these various committees that ESOP companies and boards have. Which ones do we need?

Q: Who sets the pay of board members in an ESOP company? Does the trustee have any role?

An ESOP administrative committee is a committee designated by the ESOP plan document. Its duties can vary from one company to another and need to be specified in its rules. In many companies, it is simply the board; others have a separate body for that function. There is no legal requirement for there to be an ESOP administrative committee, but in practice, plan documents almost always specify that there be one.

As a board member in a number ESOP companies,* one of the key issues I have worked on is evaluating the CEO, a core task for any board member.

When approaching a bank to help finance an ESOP transaction, the company and sellers should go in with a plan.

Updated September 20, 2021

Last year, the employee-owners of New Belgium Brewing voted to sell their 100% ESOP company to Kirin Holdings. New Belgium’s ESOP allowed for pass-through voting of shares on the proposal.

The NCEO’s first-ever ESOP transaction survey shows a number of trends in how companies structure, manage, and evaluate ESOP transactions.