APPRAISAL OF EMPLOYER SECURITIES An independent appraiser must determine the value of company stock in an ESOP on at least an annual basis. There are no exceptions to this requirement, and it applies to any plan year that the ESOP held company stock, even if the stock was not allocated. Obtaining, reviewing, and approving a stock value is one of the most time consuming parts of the administration process and it is crucial that you plan ahead. You need to discuss the timing with your valuation firm and discuss specific dates. You also need to be prepared to have your deliverables ready to go so you do not hold up the valuation process. In addition to satisfying the annual requirement, you also need to ensure that all ESOP transactions that involve buying or selling stock (e.g., contributions of stock to the plan, purchasing stock from other shareholders, redeeming shares from the plan) are transacted using the fair market value. The only way to ensure that you are using the fair market value is to obtain an appraisal as of the date of the transaction. Due to the time and expense involved with obtaining an appraisal, the valuation requirements should be considered when planning future ESOP transactions. [DIVIDENDS AND S CORPORATION DISTRIBUTIONS OF EARNINGS] [IRS FORM 5500 AND PLAN AUDIT] |
