Corey Rosen
IRS Rules That Typical ESOP Floor Price Protection Plans Are Taxable
In General Legal Advice Memo 2019-03, the IRS ruled that payments from a company to a former employee under an ESOP price protection plan are immediately taxable if made directly to the employee, but not if the employer makes a special "qualified non-elective contribution" to the plan that is allocated to the former employee’s account and then distributed as part of the ultimate account distribution. Once those funds are distributed, they would be taxed under normal distribution rules.
