Canned Plan ESOPs

Does your ESOP come from a box? It's possible to buy a "standard" ESOP plan from developers of such documents, fill in the blanks, and send it off to the IRS. (For example, the NCEO has a Model ESOP publication.) While these plans may have been carefully developed, in talking with users of these plans, we have often found that they did not provide for the maximum flexibility in plan design or failed to incorporate very recent changes flowing from regulations or law. For instance, one standard plan did not allow a company to hold shares repurchased from departed employees in a suspense account for up to five years before reallocating them (a provision a company might want in the plan to accommodate issues arising from break-in-service rules).

While these plans save up-front costs by possibly several thousand dollars, we believe they are appropriate to use only if a company also engages a qualified ESOP attorney to review them and to serve as a source of advice and feedback on how the plan might be modified over time to meet changing circumstances. Having the right plan can save a tremendous amount of money, as well as keeping the plan appropriate to what you are trying to accomplish.