Blue Ridge ESOP Associates Industry News

The recently signed Coronavirus Aid, Relief, and Economic Security (CARES) Act included changes for Required Minimum Distributions (RMDs) for the 2020 calendar year. These changes allow, for the 2020 calendar year only, the option to allow participants to rollover their RMDs, or to not receive a distribution at all. Typically, RMDs must be taken as a taxable distribution to the participant. As the sponsor of a retirement plan, you have a few options for how to proceed.

Once participants have left the company, it can be easy to lose track of them. Many ESOP’s have distribution policies which delay the time period before distributions begin.  It’s possible for these former employees to maintain balance in the ESOP for five or more years after their termination of employment before they are eligible to request a distribution. There are several important reasons to keep track of these participants. Terminated participants’ balances are factored into some compliance testing and dealing with lost participants years down the road can become a headache quickly.

As your ESOP matures, you may feel that you and your employees are starting to better understand your plan provisions and the benefits an ESOP provides. It is important for participants to feel engaged and knowledgeable about their plan. One item that can be difficult to communicate to your employees and comes later in the ESOP’s development is diversification. Your participants will want to know when they can diversify, how much they can diversify, and what their diversification withdrawal options are.