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ESOP Obligations

Repurchase Obligations for ESOPsREAL Solutionssm

As part of succession planning or a business exit strategy, you may face the need to repurchase obligations of an Employee Stock Option Plan.

Most recent statistics from the National Center for Employee Ownership estimates 7,000 ESOPs in the U.S. covering 13.5 million employees.

ESOPs offer a wide range of benefits including:

 

  • Higher employee morale and productivity
  • Increased ability to recruit and retain employees
  • Owner retains control of company
  • Stock sold in a tax-free sale
  • Earn higher after-tax proceeds vs. sale to outside buyer
  • Repay debt with tax deductible, tax-free dollars

ESOP participants have the right to receive their vested account balances when they leave employment due to trigger events like death, disability, retirement, terminations (whether voluntary or not) and diversification. Under IRS Code, the sponsoring company obligates itself to repurchase stock when it is a closely held corporation.

Billions in Unfunded Liabilities

This ESOP repurchase obligation can cause many challenges for companies. Mature ESOPs which have not pre-funded its repurchase obligations have faced severe problems, sometimes even bankruptcy. Here’s why:

Industry experts estimate less than 20 percent of the one trillion dollars in current ESOP value are funded in some manner; the remaining $800 billion looms as an unfunded liability, creating the potential for financial calamity in the future.

 

Enter REAL Solutionssm

SKA/FS listens closely to clients. And solving problems energizes our team.

Some clients expressed sufficient concern over their ability to meet repurchase obligations that in early 2013, SKA/FS and The Gottlieb Organization set out to develop a target program to remedy the funding burden.

Patent-pending REAL Solutions℠ (Repurchasing ESOP Accumulating Liabilities) is poised to become the core solution to the burgeoning concerns of ESOP trustees, ESOP company founders, and employees.

By redesigning and applying a series of specialized approaches to our proven Tandem Financial Strategysm, we make it possible for ESOP owners to accumulate assets to fund the repurchase obligation.

And every step is tailored to individual client circumstances, objectives, limitations, and timelines.

 

Don’t fall short of meeting your ESOP obligations.

Work with us to prepare.


With our go-the-extra-mile strategies, you can also:

  • Purchase all the life insurance you need instead of only what you can pay for
  • Realize significant income levels during your lifetime
  • Transform life insurance into lifelong, hard-working assets