ESOP PLANNING
The ESOP Planning process includes planning for both the current year ESOP administration process as well as the various events that take place over the life of an ESOP. This article is one in a series of ESOP Planning articles authored by Aaron Juckett. Aaron Juckett is an ESOP consultant, the founder of ESOP Insourcing LLC, and the author of The One-Stop ESOP Blog.
Let's start the ESOP planning discussion by defining planning:
"Planning is one of the most important project management and time management techniques. Planning is preparing a sequence of action steps to achieve some specific goal. If you do it effectively, you can reduce much the necessary time and effort of achieving the goal.
A plan is like a map. When following a plan, you can always see how much you have progressed towards your project goal and how far you are from your destination. Knowing where you are is essential for making good decisions on where to go or what to do next.
One more reason why you need planning is again the 80/20 Rule. It is well established that for unstructured activities 80 percent of the effort give less than 20 percent of the valuable outcome. You either spend much time on deciding what to do next, or you are taking many unnecessary, unfocused, and inefficient steps.
Planning is also crucial for meeting your needs during each action step with your time, money, or other resources. With careful planning you often can see if at some point you are likely to face a problem. It is much easier to adjust your plan to avoid or smoothen a coming crisis, rather than to deal with the crisis when it comes unexpected."
ESOP planning is planning for both the current year ESOP administration process as well as the various events that take place over the life of an ESOP. If ESOP planning is not a part of your administration process, you should schedule an ESOP planning meeting right away to get the process started. Most companies schedule planning meetings in advance and on a regular basis. You should meet at least once per year, and depending on where you are at in the planning process, you may need to meet more often. While there is no specific time that you have to conduct your meeting(s), most companies schedule them prior to the end of the plan year, at the start of the plan year, or after the annual allocation has been completed.
If you are not already, you should consider involving other members of the ESOP team (such as your internal or external recordkeeper, ESOP consultant, and ESOP attorney) in your discussions. They will be able to contribute their experience and expertise to the process as well as gain a better understanding of the timing of the allocation process and the issues that the ESOP team is facing.
Here are some of the different items you should consider during the review and preparation process, including the following: