Frequently Asked Questions

Employee Ownership FAQs

Common questions about employee stock ownership plans (ESOPs), employee ownership trusts (EOTs), and other forms of employee ownership, from the basics to technical topics.

This FAQ is written primarily for business owners, managers, and advisors involved in setting up or running an employee ownership plan. If you're an employee at an ESOP company looking to understand your own benefits and rights, see our articles on Working at an ESOP Company and The Rights of ESOP Participants.

NCEO employee ownership FAQ hero (keyboard)

Can an S ESOP company make distributions just to people over a certain age?

General rule is that an ESOP can allow in-service withdrawals of balances (plus earnings) contributed at least 2 years prior to the date of the withdrawal ("seasoned money") and upon an attained age (59 1/2 is fine and is often used because it is the break point for avoiding the early

distribution penalty. These withdrawals can be rolled over to another qualified plan. It seems that one could have a plan provision allowing

withdrawal of "seasoned money" after age 59 1/2 equal to some specified portion of the cash balance in an employee's account."[a]

Link to this FAQ Topic: S Corporation ESOPs