Can an ESOP be terminated?
Yes. Just as a company can terminate a profit sharing plan, it can also terminate an ESOP. At that point, all participants must become 100 percent vested. Benefit distributions from the ESOP are eligible to be rolled over into an IRA; ESOP distributions not rolled over are taxable, but may be eligible for special favorable tax treatment.
Related Questions
- Newly formed S Corp and newly formed ESOP. The S Corp buys assets from LLC to continue operating the business as S Corp. Does IRC section 1239 apply or is the ESOP NOT a related party? Who really owns the ESOP at the start?
- If a domestic entity is terminated, cancelled, or dissolved or a foreign entity’s certificate of authority or registration is revoked, is there a deadline for reinstatement?
- If the main line is terminated, will I be able to keep my RedPAC Supplementary Plan?
