ESOP Planning & Administrative Timeline

Thoughtware Article Published: Feb 26, 2021
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With the start of a new plan year, now is the time to start your employee stock ownership plan (ESOP) preparation for the coming year. With so many different professionals involved and interconnected pieces, it’s crucial to establish a plan to help ensure the ESOP allocation and related deliverables are completed timely each year. One of the best tools to have in place to facilitate the annual process is the ESOP administrative timeline.

While your ESOP administrative timeline can range in complexity and formatting, it’s simply a tool to help you manage the ESOP allocation process and ensure all parties are accountable to complete their individual tasks. This simple timeline could be maintained in Excel or Word. The administrative timeline should list basic information such as deliverables, responsible parties, and due dates and can be as detailed as you like. 

Common Format of the ESOP Administrative Timeline

  • Deliverable or item to be completed
  • Responsible party (company, record-keeper, trustee, valuation firm, auditor, etc.)
  • Date task is scheduled to be completed
  • Regulatory deadlines

If you’re getting ready to prepare your ESOP administrative timeline for the first time, we suggest identifying the major deliverables and due dates and working your way backward. This helps ensure the most important aspects of the process (allocation reports, participant statements, Form 5500, distribution payments, etc.) are top of mind. Once these major deliverables are identified, you can work backward to determine how much time you will need to complete the process and the steps it will take to reach that final goal. 

As mentioned above, the level of detail in your administrative timeline is flexible and can vary from year to year. Therefore, it’s important to take the time before the new plan year begins to plan out the steps for the upcoming year and help ensure every party is on the same page. 

The sample ESOP administrative timeline below is a very basic example of the type of information that should be included. 

Sample ESOP Administrative Timeline

Sample ESOP Administrative Timeline

In general, the more details you can include on your ESOP administrative timeline, the more organized and prepared you will be for the coming plan year. If you want to include more information on your administrative timeline, here are some additional items to consider:

  • Preparing and distributing preliminary diversification forms
  • Preparing and distributing required minimum distribution forms
  • Providing census information to determine eligibility
  • Computing the release of ESOP shares and preparing the related accounting entries
  • Completion of ESOP plan audit, if applicable
  • Distributing participant statements and distribution forms
  • Processing final diversification elections
  • Payment of distributions according to the terms of the distribution policy
  • Filing Form 5500 and distributing Summary Annual Report
  • Funding of payment on internal ESOP loan(s)
  • Distribution of Forms 1099-R 
  • Update plan document and summary plan description

For more information, reach out to your BKD Trusted Advisor™ or submit the Contact Us form below.

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