Blue Ridge ESOP Associates Industry News

2017 Employee Ownership Conference in Denver This Spring

Representatives from employee-owned companies (and companies seeking to learn about employee ownership) from across the nation and around the world will gather April 4-6, 2017 for the 2017 Employee Ownership Conference, hosted by the National Center for Employee Ownership (NCEO). More than 1,700 people will attend the conference which will be held at the Sheraton Denver Downtown Hotel and Conference Center.

Blue Ridge ESOP Associates is proud to be sponsoring this conference with our following professionals co-presenting in the following sessions.

There is a very high probability an ESOP will be leveraged during its lifecycle.  When this leveraging occurs and the ESOP takes on debt to acquire company stock, a number of legal documents are drafted to record the terms of the transaction and the requirements of the involved parties.  As the Plan Sponsor or Trustee of an ESOP, it is important to understand the reason these documents exist and the differences between ESOP internal loans versus external loans.

Blue Ridge is pleased to announce that Mason Monson has joined our team as a Plan Administrator. Mason comes to us with over 13 years of experience at The Prinicpal Financial Group, most recently serving as a Relationship Manager, after having moved up the ranks from Client Service Associate, Client Service Manager, and Consulting Analyst. He is a member of The ESOP Association and the NCEO where he has presented seminars about communicating ESOPs to different generations. He holds his Bachelors of Science in Business Administration from The University of North Carolina at Charlotte. Mason will be located in Orange County California.

The Greensboro based company, Quaintance-Weaver Restaurants and Hotels, which operates multiple hotels and restaurants is now owned by the people who keep the company running from serving tables to making beds. Last week, the founding partners were emotional when they announced the news to their 600+ employees. The new owners share the same values as the original founders of , and according to this article, that is exactly what they wanted.

It is very common for an ESOP to purchase shares through a leveraged transaction. It is also very common to see a two part transaction agreement between three entities: the Company, the ESOP and a financial institution. In stage one, a financial institution will lend the money to purchase the ESOP shares to the Company with a loan agreement, from this point on referred to as the External Note (aka Company Note). The second stage is the loan agreement between the Company and the ESOP to purchase the shares, from this point on known as the Internal Note (aka ESOP Note). In this scenario you have two separate loan agreements.

Many C Corporation companies who sponsor an Employee Stock Ownership Plan elect to pay dividends to their ESOP.  This article will provide a summary of the rules that the company needs to follow if they wish claim a deduction on the dividends paid to the ESOP.

Some ESOPs permit participants to take a lump sum distribution from their accounts.  Some may provide an option for all or a portion of the distribution to be paid in shares of Employer stock.

IRS Provides Help with Rollovers

If you receive a distribution check and fail to roll over the payment to an IRA or other plan within 60 days, you may be in luck.  The IRS has provided a self-certification procedure for those who inadvertently fail to complete a rollover within 60 days.  Revenue Procedure 2016-47 provides a sample self-certification letter that a taxpayer can use to notify an IRA or other institution that he qualifies for a waiver of the 60-day rollover requirement.  The waiver applies if one or more of 11 circumstances apply, including:

• Check was misplaced and not cashed
• Taxpayer’s home was severely damaged
• A family member died
• Taxpayer or family member was seriously ill
• Taxpayer was in jail
• Postal error

Form 5500