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ESOP Repurchase

As a qualified plan, an employee stock ownership plan (ESOP) is required to repurchase the shares of departing and retiring employees who participate in the plan. One of the most effective ways to help protect the business from both planned and unplanned events with an ESOP is by implementing an ESOP repurchase obligation funding strategy.

Many plan for this expense, at least in part, through a sinking fund (investments the company uses to accumulate the necessary funds to address this need). Life insurance can be one solution to accumulate these funds for lifetime buyouts, particularly because it can cover unexpected buyout expenses triggered by death, as well as transfers during life. Tax-deferred accumulation makes life insurance an effective option for accumulating funds for a lifetime buyout.

Related content: ESOPs

587783-092018

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