Blue Ridge ESOP Associates Industry News

When comparing ESOP benefit levels there is variance across all ESOP companies and even within the same ESOP company from year to year. This article is intended to highlight the key factors that contribute to benefit levels and provide reasoning for the variance.

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.