Disadvantages in an ESOP Employee Stock Ownership Plan

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thebiz.tv (800) 290-7226 • Presented by Brokers Alliance with guest co-host Kereti Tuioti • The ESOP is essentially a stock bonus plan in which employer stock may be used for contributions. Some of the disadvantages to employees are that they will generally not produce as large of a contribution and deduction for older employees as will a defined benefit plan and that the deductible contribution limits are set at 25% of covered compensation. Additional issues include certain voting rights must be passed through to the participants, ESOPs can be costly to set up with ongoing administration which can also be expensive because of the need to have the stock value appraised each year. • Future repurchases may not come at a convenient time and must be made with after-tax dollars. This could place a financial strain on the employer. Effective July 1, 2012, if a plan gives participants the right to direct any investments, plan sponsors must provide participants with expanded, standardized investment fee and performance information. Failure to comply with these ERISA requirements may results in a breach of fiduciary duty to plan participants and the loss of ERISA Section 404(c) protection (meaning the plan fiduciaries may be held responsible for the results of the participants' own investment choices). Your Hosts explore that impact with ESOPs on employees and employers. • This video was produced by http://bizmediastudios.com/ • • • ____________________________ • Follow Us On Social! • ____________________________ • TWITTER: / brokersalliance • FACEBOOK: / 115179661832101 • INSTAGRAM: / brokersalliance • WEBSITE: http://www.brokersalliance.com/ • GOOGLE+: https://www.google.com/+BrokersAlliance • LINKEDIN: / brokers-alliance-inc

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