ESOP Benefits Distribution Options

ESOPs are one form of employee participation in corporate ownership, offering compelling benefits to selling owners, companies and employees.

ESOP benefits distribution outlines how the benefits of an employee stock ownership plan (ESOP) are distributed. ESOP benefits distribution may be made in cash or in company stock, subject to the put option.

ESOP distribution rules state that ESOP participants must be given the right to require a distribution of their ESOP account balances in the form of company stock, unless the company’s organizational documents restrict ownership of company stock to active employees, or the company is an S corporation. In these cases, ESOP benefits distribution comes in the form of cash or company stock which must be immediately resold to the company.

ESOP benefits distribution can appear in a lump sum or in installments. If installment ESOP benefits distribution is available, the minimum distribution period may not exceed five years. ESOPs are one form of employee participation in corporate ownership, offering compelling benefits to selling owners, companies and employees.