Howdy …

I’ve looked through about 40 pages of this forum and have become more confused than when I started. I am not involved with an ESOP (S-Corp) other than being an ex-employee and apparently an ‘inactive participant’.

I fully understand and partially agree with the idea that stock ownership be limited to current employees. I understand loan repayment and stock repurchase obligations.

What I don’t understand is how the ESOP can control my account for five years after I was fired from the company.

I was very fortunate – during the 11 years I worked there, the valuation of the stock more than tripled. The last year I had a stock balance the valuation increased 30% giving me an account worth $380k. Six months after the end of the ESOP plan year I received a letter from the company informing me I had to pick an investment because I could no longer have company stock. The company picked 3 funds I could invest in with Vanguard – all of these funds are earning about 5%. I now receive a quarterly statement from Vanguard. I assume the company had to come up with the money to put into the Vanguard account, so it seems to me they are not too concerned about loan repayment or repurchase obligations.

What is the advantage to the company for not allowing a lump-sum distribution from this account? Is Vanguard paying them interest too? Delaying the distribution for the 5 year allowable time limit seems to me to be punishment more than anything else.

Can I lose the funds in this account if the company is sold? The company is fairly stable and been in operation for 100+ years. There has been a change in management in the last few years. Recent posts on the company’s web blog make me wonder if they are looking for a buyer.

Shortly after I was terminated by the company, it became obvious that my mother was unable to care for herself. I have been unemployed for the past year and a half and have been caring for her. Have there been any new ‘safe-harbor’ rules that would allow me to get to my ESOP funds?

Thanks for any comments …

First dig out your copy of the Summary Plan Description (or request one from the ESOP's Plan Administrator).

The section on Distributions will describe the Plan's options and requirements for distributions, including information on when you can receive a distribution from the ESOP. It should also tell you how you go about requesting a distribution.

The timing of when distributions MUST be made should be summarized in the Summary Plan Description. In some cases this vary depending on whether or not you are at the early or normal retirement age.