ESOP Distribution Policy: Choices, Consequences & Compromises

By Tina DiCroce, Vice President

The ESOP distribution policy—the policy which dictates the timing, method, and form in which participants receive their ESOP account balance upon termination—is a key element of plan design. Accordingly, company leaders should thoughtfully approach the development of their policy as well as changes to the policy that may be necessary after the plan’s inception. What works well early in the life of the ESOP may not work as well years later. With careful consideration and attention, distribution policy is a tool ESOP companies can use to manage repurchase obligations and participant benefit levels throughout the ESOP lifecycle.

>> Learn more about the benefits and consequences of various choices when designing or amending your ESOP distribution policy