Why Make Company Stock Part of Your Retirement Plan?
Adding company stock to a retirement program can be one of the most effective ways to make an organization more incentive-driven. Doing so creates a market for the stock-allowing employees to take advantage of ownership of the restructured organization, and can also help maximize an Initial Public Offering (IPO).
HOW DO YOU INCORPORATE COMPANY STOCK IN A RETIREMENT PLAN?
401(k) plan with stock option
A 401(k) plan with employer stock as an investment option combines the equity ownership of employer securities with the retirement savings benefits of a 401(k) plan, allowing participants to contribute to the stock fund and the employer to make matching contributions in the form of stock.
Employee Stock Ownership Plan (ESOP)
An ESOP provides retirement benefits in the form of company stock. ESOPs are frequently used to raise capital, create shareholder liquidity and to keep stock in “friendly hands.” An ESOP allows the plan to borrow money for the purpose of acquiring employer securities, usually at an attractive rate for the benefit of employees. The annual loan repayment results in annual contributions of stock to plan participants.
KSOP
A KSOP is an ESOP with a 401(k) feature and provides for both employer stock contributions and employee deferrals. Employer contributions can be mad in either stock or cash. A KSOP combines two separate plans, offering simplified administration, streamlined employee communication and greater cost efficiencies.
WHAT SERVICES ARE INVOLVED IN ADDING STOCK TO A RETIREMENT PLAN?
Pentegra administers company stock in a daily valuation environment-whether it is traded thinly or traded on a major exchange-and offers 24/7 access to account information and fund performance using Pentegra’s internet-based account access system, Pentegra OnLine. We provide a full spectrum of employer stock
services-from the IPO to disseminating employee communication and proxy requirements.
Legal Services
- Prepare plan document to add employer stock fund
- Preparation of SPD or Summary of Material Modification
- Review of Prospectus Supplement and coordination with counsel for 401(k) and ESOP
- Preparation of Investment Allocation Forms
- Coordination of the establishment of the Trustee/ Custodial relationship
Operations
- Coordination with Market Maker/Underwriter, Transfer Agent and Trustee for initial stock purchase
- Completion of Plan Stock Order Form for restricted/ unrestricted shares
- Coordination with Conversion Center to have 401(k) assets available for IPO stock purchase
- Coordinate with Transfer Agent for delivery of stock certificates
- Services for over or under subscription
- Administration of stock in a daily valuation environment, whether it is traded thinly or traded on a major exchange
Education & Communication
- Presentation to employees at your meeting with Market Maker
- Development of employee communications regarding the stock offering
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