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Employee Stock Ownership Plan (ESOP) Answer Book, Fifth  Edition by Daniel B. Lange ,Brian M. Pinheiro Ballard Spahr LLP Employee Stock Ownership Plan (ESOP) Answer Book, Fifth  Edition by Daniel B. Lange ,Brian M. Pinheiro Ballard Spahr LLP

Employee Stock Ownership Plan (ESOP) Answer Book, Fifth Edition

By Brian M. Pinheiro, Daniel B. Lange
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Employee Stock Ownership Plan Answer Book covers the many regulations, interpretations, rulings, and cases that seek to interpret the laws governing the design, administration, and operation of ESOPs. This practical manual focuses on the nuts and bolts of ESOP design and mechanics so that professionals can find new and creative uses for the ESOP model.

Employee Stock Ownership Plan Answer Book is written in simple, straightforward language and avoids technical jargon, and includes citations of authority if additional research is required.

Employee Stock Ownership Plan Answer Book has been completely updated and revised. Highlights of the Fifth Edition include:

  • A summary of advantages and disadvantages of ESOPs, the various planning opportunities ESOPs present, and the significant risks that should be considered
  • An outline of the legal requirements for structuring an ESOP, primarily arising from the Internal Revenue Code
  • A discussion of the rules for deducting various amounts contributed to an ESOP, distinguishing how such rules differ from rules in other types of retirement plans
  • A discussion of the complex fiduciary duties and relationships inherent in the unique structure of an ESOP. More than any other type of retirement plan, fiduciaries of ESOPs run the risk of engaging in prohibited self dealing
  • The issues that arise in valuing companies owned in whole or in part by an ESOP
  • A detailed description of the special tax advantages for shareholders who sell their shares to an ESOP in a transaction that satisfies Code Section 1042, usually as part of a corporate ownership succession strategy
  • An overview of the securities laws implicated by the employer securities held within an ESOP
  • An explanation of ESOP leveraging - perhaps the most unique of the features of an ESOP - which allows the ESOP to be used by the sponsoring employer to obtain tax-advantaged corporate financing
  • An in-depth look at special issues arising in ESOPs sponsored by Subchapter S corporations
  • A discussion of the many uses of ESOPs in corporate merger and acquisition transactions, and the special treatment that often must be afforded to the ESOP fiduciaries who control the disposition of the employer securities held by the ESOP

Note: Online subscriptions are for three-month periods.

Previous Edition: Employee Stock Ownership Plan (ESOP) Answer Book, Fourth Edition ISBN 9781454810315

Last Updated 06/14/2021
Update Frequency Annually
Product Line Wolters Kluwer Legal & Regulatory U.S.
SKU 10044764-7777
Publish Frequency Annually
Product Line Wolters Kluwer Legal & Regulatory U.S.
SKU 000000000010048437
Table of Contents

1. Overview

  • ESOP Basics
  • History of ESOPs

2. Risks and Rewards of Establishing an ESOP

  • Benefits and Advantages of ESOPs
  • Risks and Disadvantages of ESOPs
  • Repurchase Obligation: The Ultimate Cost

3. Basic ESOP Requirements

  • Structure of an ESOP
  • Invested Primarily in Qualifying Employer Securities
  • Acquisition of Employer Securities
  • Section 401(a) Tax-Qualification Requirements
  • Diversification
  • Timing of Distributions
  • Forms of Distribution
  • Put Option Requirement: The Right to Demand Employer Securities
  • Rebalancing and Reshuffling
  • Voting Rights

4. Deductibility

  • General ESOP Deduction Rules
  • Deducting Dividends

5. Fiduciary Obligations in ESOPs

  • Identification of ERISA Fiduciaries
  • Delegating Fiduciary Duties
  • Applying the ERISA Fiduciary Duties to ESOP Fiduciaries
  • Breach of Fiduciary Duty and Mitigation of Liability

6. ESOPs and Prohibited Transactions

  • Statutory Requirements
  • Exemptions from Prohibited Transactions
  • Adequate Consideration

7. Valuation

  • Determining the ESOP’s Value
  • The Independent Appraiser

8. Section 1042 Transactions

  • Overview of Code Section 1042
  • Written Statements of Election and Purchase
  • Qualified Securities Test
  • ESOP Ownership Test
  • Qualified Replacement Property Test
  • Employer's Verified Written Statement of Consent
  • Deferred Taxation of Section 1042 Transaction Proceeds
  • Prohibited ESOP Allocations to Shareholders
  • Donations of Securities to an ESOP

9. Securities Reporting and ESOPs of Publicly Traded Companies

  • Securities Considerations
  • ESOPs Sponsored by Publicly Traded Companies

10. Leveraged ESOPs

  • Leveraging: A Unique ESOP Feature
  • Exempt Loans
  • Refinancing Exempt Loans
  • Mechanics of a Leveraged ESOP
  • Repayment of Exempt Loans and Release of Employer Securities

11. ESOPs Maintained by Subchapter S Corporations

  • Subchapter S Corporation ESOP Basics
  • Taxation of Subchapter S Corporation ESOPs
  • Subchapter S Corporation ESOP Anti-Abuse Rules

12. Mergers and Acquisitions: Transactions with ESOPs as Buyers or Sellers

  • ESOPs and M&A Transactions
  • Acquisitions
  • Divestitures
  • Sale of the Company Sponsoring the ESOP
  • Other Transactions and Considerations


  • Response to Technical Assistance Request (#1) Concerning Immediate Resale Provisions in ESOPs
  • Response to Technical Assistance Request (#2) With Regard to Language That Is Required To Be Included in an ESOP
  • Response to Technical Assistance Request (#4) Regarding Rebalancing and Reshuffling Provisions in ESOPs and Stock Bonus Plans
  • Response to Technical Assistance Request (#5) With Regard to Reshuffling Provisions in ESOPs Designed To Prevent the Occurrence of a Nonallocation Year
  • Form S-8 - Registration Statement Under the Securities Act of 1933
  • IRS Form 2553 - Election by a Small Business Corporation
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