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ESOPs

Employee Stock Ownership Plans (ESOPs) are a great way for companies to reward their hard-working and dedicated employees.

An ESOP is an employee benefit plan that is created when a company sets up a trust fund into which it contributes new shares of its own stock or cash to buy existing shares. The ESOP can also borrow money to buy new or existing shares, with the company making cash contributions to the plan to enable it to repay the loan.

Shares in the trust are allocated to the employees. When employees leave the company, they receive their stock, which the company must buy back from them at its fair market value. Private companies must have an annual outside valuation to determine the price of their shares.

The administration of ESOPs can be very complex. The employees at Retirement Management Services have extensive experience with Employee Stock Ownership Plans and are happy to help with yours.

For more information on ESOPs, view our resources or contact us to discuss how we can help you meet your business and retirement plan goals.

Repurchase Obligation Studies

Retirement Management Services provides quality repurchase obligation studies for our clients.

Repurchase obligations help an ESOP company understand the impact that their plan’s structure and distribution policy will have on future cash flow needs.  It can be a critical planning tool to ensure the long-term success of both the company and the ESOP.  Our data driven repurchase obligation study will be built on forecasted turnover, distribution needs for terminations and diversification and will help the company budget for required future cash outflows.  This will help ensure that both management and the ESOP Trustee are comfortable that the ESOP trust will have the necessary funds available to meet distribution obligations without eliminating future business growth and strategic planning. 

For more information or a quote for a study for your plan, please contact us.

ESOP FEASIBILITY STUDIES

RMS can perform an ESOP feasibility study that provides a “decision package” for business owners to use in making an informed decision regarding establishing an ESOP.  This study helps decision makers determine if, and to what extent, the ESOP can assist the owner(s) in achieving a desired objective.  The study will:

• Help educate the owners and management on what you can and cannot do with an ESOP;
• Explain the advantages and disadvantages of ESOPs;
• Help management to develop long-term assumptions for our projections;
• Determine if the company has adequate payroll for ESOP participants to make the ESOP contributions deductible;
• Provide estimates of what the repurchase obligation will be and how the company will handle it; and
• Recommend the best plan design for the company.

The purpose of an ESOP feasibility analysis is to give the selling shareholder(s) and management of the employer the information needed to determine whether to move forward with an ESOP installation transaction. Further, the results of the feasibility study enable the employer and the selling shareholder(s) to structure a transaction that is beneficial to the par­ties to the transaction. 

Contact us for more information on an ESOP feasibility analysis.