ESOP Distribution Policies

Abstract

Sponsors of employee stock ownership plans may have a distribution policy to govern how distributions from the plan will be made. Frequently, these policies are afterthoughts and drafted without considering the sponsor’s unique circumstances. However, with the Internal Revenue Service reportedly ready to ask employee stock ownership plan sponsors to provide a copy of the plan’s distribution policy as a part of the determination letter process, sponsors should take a fresh look at their distribution policy or prepare one if a policy is not in place. The policy should be carefully thought out to meet the sponsor’s needs while balancing several competing interests.