Sixth Annual ESOP U Conference
August 15 - 16, 2013
Carolinas Chapter- Pinehurst Resort
Susan Petrinena and Ed Llano
Swerdlin & Company
Atlanta, GA
Nancy Mills-Smith
K2 Solutions
Southern Pines, NC
1
A Plan Year Calendar by:
Reporting Cycle
Responsibilities
Responsible parties
2
ESOP “Team”
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Plan Sponsor- ESOP Company
◦ Financial Professional
◦ Human Resource Department
◦ Payroll
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ESOP Attorney
Trustee
Valuation Professional
Third Party Administration (TPA)
Auditor
3
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TBD: Prepares 1099-R forms to report distributions
for the prior calendar year.
◦ 1099s must be post marked no later than January
31st.
TBD: Prepare and send Form 945 and copies of
1099-Rs to IRS.
◦ Tax Form 945 must be post marked prior to the
last day of February. Form 1099Rs are due and
generally filed electronically by that same date.
HR/TPA: Provide Qualified Participants with
preliminary diversification notices.
◦ Election forms must be received within the 1st 90
days of the plan year following diversification year
4
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ESOP Company: Prepares and provides copies of
financial statements to Valuation Firm for their
use in drafting an opinion on the fair market value
of company stock as of the last day of the fiscal
year.
Valuation Firm: Delivers a draft opinion regarding
the fair market value of the stock to Trustees
Trustees: Review the opinion and provide
comments/feedback
Valuation Firm: Considers comments and make
adjustments before preparing the final opinion of
the fair market value of the company stock.
5
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Trustees: Approve the Valuation Firm’s final
opinion of the fair market value of ESOP
Company.
Valuation Firm: Meets with Trustees, ESOP
Company, and/or Benefits Committee to deliver
full valuation report.
ESOP Company: Finalizes the fair market value
of ESOP Company stock.
Trustees: Perform due diligence to determine
prudence of continued investment in ESOP
Company stock.
6
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Payroll/HR: Delivers completed data request
to TPA.
◦ Data request generally includes census/payroll data
for ALL employees employed during the Plan Year.
◦ ESOP financials, including copies of bank statements
and/or distributions processed.
◦ Stock activity-recycled shares vs. redeemed shares.
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TPA: Reviews and updates employee census
data and prepares initial plan compliance tests
(i.e., ADP/ACP test, maximum deductible
contribution)
◦ ADP/ACP testing is prepared early in order to meet
the March 15th deadline for any necessary refunds.
7
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TPA: Calculates share release, allocates
company contributions and forfeitures to
participants’ accounts.
TPA: Completes all annual compliance
tests (i.e., Annual Additions, Top Heavy,
409(p) Anti-abuse)
TPA: Prepares and delivers to Benefits
Committee: participant account balance
statements, compliance reports and
information addressing termination,
eligibility for diversification and required
distributions for age 70 ½ or older.
8
HR/Payroll: Distributes Participant ESOP
statements.
 TPA: Prepares and provides a draft Form 5500
and summary annual report to the Plan
Sponsor.
 Accounting Firm: Completes the accountant’s
opinion and supporting schedules for filing with
Form 5500 (plans over 100 participants).
• HR/TPA: Executes diversification election
instructions received from qualified participants.
NOTE: election forms must be received within
the 1st 90 days and processed within the next
90 days.
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9
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TPA: Finalizes Form 5500 and provide
signature ready forms to the Plan Sponsor.
TBD: Files Form 5500 for the previous
plan year (or request an extension). Due by
the last day of the seventh month
following the last day of the plan year.
10
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ESOP Company: Makes final company cash
contributions for previous year prior to the
corporate tax filing deadline.
HR/Payroll: Distributes Summary Annual
Report to participants (by the deadline for
filing Form 5500 including an extension).
Benefits Committee: Makes distributions
to participants and beneficiaries.
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• HR/TPA:
Remits
taxes
withheld
from
distributions to IRS.
• TPA: Rollover small account balances under the
“Cash Out Threshhold” in accordance with Plan.
 TBD:
One last chance to file Form 5500 (if
extension was requested), by 9 ½ months after
the plan year end.
 HR/Payroll: Distributes summary annual report
to participants (if Form 5500 extension was
requested).
12
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HR/Payroll: Reminds participants to
consider changing beneficiary in light of
events during the year.
Trustees: Engages valuation firm to
prepare the valuation report for the stock
for the current plan year end.
TPA: Delivers data request for the current
year to Plan Sponsor; to requests
information necessary to prepare the
administration reporting and
disclosures……..Start all over again
.
13
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HR/Payroll
◦ Reviews personnel files to determine which
employees will begin participation in the ESOP;
provide new participants with summary plan
description and beneficiary designation form.
◦ Distributes Summary of Material Modifications
to plan participants to notify them of any plan
amendments.
◦ For ESOP’s with 401(k) feature: Timely
remittal of salary deferrals/loan payments (if
applicable) to 401(k) record keeper.
14
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Attorney: Amends plan document for changes
required by legislation or for changes initiated
by Plan Sponsor; prepare Summary of Material
Modifications as necessary to notify
participants of changes to plan.
Trustees: Votes stock held by the ESOP unless
pass through voting applies, which will require
solicitation of participants.
TBD: Prepares repurchase liability forecast.
15
Questions?
Susan Petrirena & Ed Ilano
Swerdlin & Company
5901 Peachtree Dunwoody
Road Building B, Suite 170
Atlanta, GA 30328
Phone: 678-775-5527
Email: spetrirena@swerdlin.net
Nancy Mills-Smith
VP of Operations
K2 Solutions, Inc.
5735 Hwy U.S. 1
Southern Pines, NC 28387
Phone 910-692-6898
Email: nmills-smith@k2si.com