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.

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What are typical administrative oversight responsibilities of the ESOP administrative committee?

The list is a long one, but here are some of the key issues:

1. Keeping minutes of committee meetings.

2. Making sure the plan administrator gets everyone who is qualified into the plan, and that once they are there, they get their proper allocations, statements, and forfeitures.

3. Making sure the administrator files the proper reports with the government, obtains the necessary forms for spousal consent, follows the plan's procedures for reincluding people into the plan who have left the company and returned, etc.

4. Guaranteeing that proper procedures are followed in the case of employee complaints about the plan and that other employee rights, such as voting and the opportunity to inspect plan documents, are provided.

5. Hiring a plan administrator and an investment manager for non-stock assets in the plan.

6. Assuring that contributions to the plan are properly credited.

7. Overseeing plan distributions to assure they are done properly.

8. Having a repurchase obligation study done and creating a plan to deal with the issue (this may also be a responsibility of the company, however.)

9. Interpreting plan provisions.

10. Adopting any additional rules that may be necessary to operate the plan to make specific what may be general plan provisions (e.g., plans sometime provide discretion to the ESOP administrative committee about when to make certain distributions, provided the distributions are made in a non-discriminatory way and are spelled out in written policy).

11. Providing the administrator with the information needed to operate the plan and getting from the administrator the information the company needs to file tax reports.

This may sound like a daunting list, but, in practice, most of the work is done by the plan's administrator. The ESOP administrative committee must make sure that administrator is competent and must oversee its functioning, however.

Link to this FAQ Topic: Governance, Fiduciaries & Compliance