Blue Ridge ESOP Associates Industry News

Blue Ridge professionals, Chad Guzinski and Renee Stadtmueller will be attending Illinois Chapter - 2020 Spring Conference in Champaign, IL on March 5. Renee will be speaking about "ESOP Accounting and Administration" which will focus on key ESOP administration and compliance considerations and the GAAP accounting treatment. Topics covered include allocation methods, funding strategies and distribution policies, diversification, segregation of terminated participants, and the respective financial statement and GAAP treatment.

Today there was a hearing in front of the House Small Business Committee regarding "Challenges and Benefits of Employee-owned Small Businesses". We encourage you to listen and learn what was presented today promoting employee-ownership.

Blue Ridge professionals, Tom Roback and Carla Klingler will be attending The New South Chapter 2020 Spring Conference in Chattanooga, TN on February 26-27. Carla will be speaking about "ESOP Basics" to help everyone from first time conference attendees to those who need a refresher course on the basics of ESOPs. This session will give attendees a better understanding of how an ESOP works, why ESOP companies are so great, and what you can do to make yours better!  Registration closes February 19, so make plans to register this week.

From the article re: Top News for New York Engineering Firms in 2020  - "The ACEC New York-supported legislation would allow an Employee Stock Ownership Plan to own a greater amount of an organized design professional firm. Licensed design professionals would control and manage the firm, but a larger number of employees can share in the benefits of ownership. Employee ownership and professional management and control is a common business model across the country, and it helps firms manage ownership transition, stay locally-owned, retain top talent and reward those who build the firm’s success."

Connecticut passed a new law effective October 1, 2019,  that makes it easier for architectural firms to become 100% owned by an ESOP. There is a hope that this updated law in Connecticut will pave the way for more ESOP activity among other professional corporations of this type. More information can be found here.

It is common for an ESOP to be established with a leveraged stock purchase from the selling shareholder(s).  When a leveraged ESOP is established, the shares acquired initially are not allocated to participants. Those shares initially sit in a suspense account.  Then as the company makes contributions to the ESOP, the ESOP uses those contributions to make a payment on the loan between the company and the ESOP. When that occurs, a portion of the shares in the suspense account are released and allocated to eligible participants’ accounts based on the provisions in your plan document. 

What is an SPD?

New Plan Limits for 2020

Final Hardship Regulations

You may have terminated participants in your qualified retirement plan who are zero percent vested in their account balance. How long do you need to keep them in the plan as plan participants? The plan document should have language which clarifies when to forfeit a non-vested account balance for a terminated participant.  The most common forfeiture language that we see states that a forfeiture of non-vested balances occurs after the earlier of five consecutive one-year breaks-in-service or distribution of the vested account balance to the terminated participant. A break-in-service is usually defined as a plan year in which a participant worked less than 501 hours of service.