ESOP repurchase obligation studies and administration

Optimizing Foundations supports employee stock ownership plans after the transaction closes: the repurchase obligation study the board needs to plan for, the annual administration that keeps the plan compliant and a participant portal that gives employee-owners their statements and elections online.

What is included

• Repurchase obligation studies. Projections of the cash the company will need to buy back shares from departing participants over ten to thirty years, driven by turnover, retirement, death and disability assumptions and the expected share value, with scenarios for distribution policy, recycling versus redeeming shares and timing. Results are presented to the board with funding alternatives.
• Annual administration. Share allocations, vesting, forfeitures, diversification elections, distributions, the Section 409(p) test for S corporation ESOPs, coverage and nondiscrimination testing, Form 5500 and participant statements.
• Participant portal. The IQ Portal gives participants secure access to account statements, distribution and diversification elections and plan documents, and gives the company a record of every election.
• Succession and transaction support. Modeling of second-stage transactions, leveraged repurchases and the interaction of the ESOP with the company's other plans.

How the work runs

The repurchase study starts with the participant census, the share register and the most recent independent valuation. Assumptions are set with management and reviewed against the company's experience each year. Administration runs on a calendar set to the plan year. A second credentialed actuary reviews the repurchase study before it goes to the board.

Common questions

How often should the repurchase study be updated? Annually for a mature plan, or whenever the share value, the workforce or the distribution policy changes materially. The study is built to be refreshed each year at a lower cost than the initial engagement.

Does the firm perform the share valuation? No. The independent appraisal is performed by a valuation firm engaged by the trustee. The firm uses it as an input.

Every deliverable described here is reviewed by a second credentialed actuary before delivery. This page is general information about the firm's services and is not advice for any specific plan.