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ESOP Regulatory Rulings 1990-2012

(Digital Version)

by Corey Rosen

This is provided as a PDF, with no shipping charges. It also is available in a print version (for which shipping charges apply).
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This publication provides practitioners and other interested people with a summary of rulings and regulations on ESOPs and related plans. It includes guidance from the IRS and the DOL through IRS private letter rulings (PLRs), DOL advisory opinions, DOL field assistance bulletins, IRS Technical Assistance Memoranda, and similar pronouncements such as the "ESOP Cadre" guidance. Regulations can be very lengthy, and here we do not summarize them in detail but rather highlight the key issues and rules. The original version of this publication appeared in 2011. The 2012 edition adds summaries of IRS Notice 2011-19, Form 8955-SSA, Revenue Procedure 2011-8, and IRS Announcement 2011-82.

You also may be interested in our related publication ESOP and 401(k) Plan Employer Stock Litigation Review 1990-2012, which categorizes court decisions in ESOP and 401(k) company stock cases from 1990 through mid-2012 and provides brief summaries for the ESOP-related decisions and, starting in 2010, most 401(k) cases.

Publication Details

Format: PDF, 21 pages
Publication date: August 2012
Status: Available for electronic delivery

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Contents

Introduction
Banks and Thrift Institutions
Contributions
Definition of Employer Securities
Distribution Requirements, Procedures, and Taxation
Distribution Taxation
Diversification
Dividends
Eligibility, Vesting, and Allocation Issues
ESOP/401(k) Plans
Federal Contractor Reimbursement
Fiduciary Issues
Leveraged ESOP Issues
Mergers and Reorganizations
PAYSOPs (Payroll-Based Stock Ownership Plans)
Plan Administration
Plan-to-Plan Transfers
Pension Plan Reversions
S ESOP Corporation Anti-Abuse Rules
S Corporation Issues Other Than Anti-Abuse Rules
Sale of Stock to an ESOP (Including 1042 Issues)
Securities Law

Excerpts

Distribution Taxation

Net unrealized appreciation. PLR 200509032 and PLR 200507016: Allowed employees to take net unrealized appreciation (NUA) in cases where corporate transactions resulted either in employer securities in one company being replaced with employer securities in another or where employer contributions of stock were sold, followed by an employee election to invest in employer stock.

Net unrealized appreciation. PLR 199919039: Ruled that distributions from an ESOP after a complex reorganization were eligible for net unrealized appreciation treatment.

Net unrealized appreciation. PLR 199931051: Ruled that shares in an ESOP transferred to a company's former subsidiary are still treatable as qualifying employer securities for purposes of eligibility for net unrealized appreciation.

Net unrealized appreciation. PLR 199928034 and PLR 9721036: Ruled that a participant who elects to roll over the cash portion of an ESOP into an IRA and sell the shares outside of the IRA can take net unrealized appreciation on the sale of the shares.

Averaging contribution bases. PLR 9147053: Ruled a company could use the average of the various bases for calculating the value of contributions to an ESOP for calculating net unrealized appreciation. The company, which had multiple subsidiaries, operated a KSOP with a complex system for using employee contributions, employer contributions, and earnings on shares to repay a loan.