How do I sell an ESOP of my previous employer?
October 9, 2014
Date: 13 Jun 2007
From: Tim
How do I go about selling stock from an ESOP of my former employer, so I can buy other investments?
Answer
Date: 29 Jun 2007
Hello Tim,
This is a very complex question for which you really should meet with a tax consultant. (That is our business!) Handling retirement plan distributions is loaded with tax traps and financial planning considerations.
The starting place for information is the Summary Plan Description that you should have received from your employer, and the person who is responsible for administering the plan. The plan should tell you when distributions must be made after termination.
Based on your question, I am assuming the employer stock is not publicly traded. In that case, employee participants must have a “put” option, which is an option to sell the stock to the employer, under a fair valuation formula. The period during which the distributee may exercise the option is from the date following the date of distribution to the date 60 days thereafter. If the option isn’t exercised during that period, the employer must provide another option to exercise during a 60- day period in the following plan year.
The option may provide for payment for the stock in substantially equal periodic payments (at least annually) over a period of up to five years, and that arrangement must be adequately secured.
This is just some basic information to help you get started. Please make that consultation appointment.
Good luck!
Mike Gray