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Business Protection

ESOP Repurchase Key Person

Business Succession

Buy-Sell Strategies Transfer Strategies

Income Protection

Key Employee Retention & Retirement

Bonus Bonus - LLC Member Bonus - S Owner Bonus (Tax Exempt) Death Benefit Only Death Benefit Only (Tax Exempt) Deferred Comp - 457(b) and 457(f) Deferred Comp - Defined Benefit Deferred Comp - Defined Contribution Deferred Comp - Incentive Bonus Deferred Comp - Select Reward Deferred Comp - Select Reward (Tax Exempt) Deferred Comp - SERP Endorsement Split Dollar Loan Split Dollar

Legacy & Estate Planning

Charitable Giving Gifting Strategies Inheritance Equalization Private Split Dollar Special Needs Trust Solutions Estate Tax Reports

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.

Key Features

Using life insurance to create a sinking fund for repurchasing stock:

Reduces and levelizes the cash flow required to repurchase shares in future years
May be viewed positively by ESOP participants and trustee
Finances the repurchase obligation and remains on the company's balance sheet
Makes it available to any corporate purpose
Doesn't protect the fund from creditor claims
May be insufficient and the company is ultimately responsible for fulfilling ESOP repurchase obligations

Consumer Materials

Before the Sale

ESOP Repurchase Employer Overview Flyer (BB12198)
Show employers with ESOPs how a repurchase obligation funding strategy can help them.
View (PDF) • Order

ESOP Planning with Life Insurance Guide (BB11945)
Show employers with ESOPs how a little long-term planning can lead to more financial security.
View (PDF) • Order

During the Sale

Sample Proposal and Financial Model (BB12162) | Request for Proposal (BB12174)
A customized proposal can be created by the Business and Advanced Solutions team by using the Request for Proposal below. It will be customized for your client with appropriate cover information, financial model, and illustration.
View Sample Proposal and Financial Model (PDF) • View Request for Proposal (DOC)

After the Sale

Tap in to Technology ESOP Services Flyer (PQ8305V)
Showcases the benefits of technologies such as My Principal ESOP Repurchase Liability Solution^® (My PERLS), e-Distribution, and e-Diversification services.
View (PDF) • Order

Producer Materials

Key materials listed below.

ESOP Planning Opportunities Presentation (BB12300)

Provides an overview of what Employee Stock Ownership Plans are, how they work, and the opportunities they present for financial professionals.

View (PPT)

Business Submission Checklist (DD849R)

Form that must be used when submitting Life applications to BMA to fund business solutions.

View (PDF)

Next Steps

3446481-032024