I work for a division of an "employee owned" firm. Part of our retirement plan is a company ESOP program in which a percentage of our salary is given to us once a year in company shares. As we are "private", an independent accounting firm valuates the shares once a year, and we get letters informing us how much our shares are worth. Our division is now up for sale, and we are being told that the company keeps the ESOP shares, and we are to contact the company at retirement, at which point we are entitled to the shares at the then current valuation. I thought that the rules for ESOP's state that within 5 years of separation from the company, the former employee must be offered the opportunity to cash out of the plan and roll the money into another retirement vehicle. Anyone have any info. on this?

Greetings, Klf, and welcome. You wrote:

<<I work for a division of an "employee owned" firm. Part of our retirement plan is a company ESOP program in which a percentage of our salary is given to us once a year in company shares. As we are "private", an independent accounting firm valuates the shares once a year, and we get letters informing us how much our shares are worth. Our division is now up for sale, and we are being told that the company keeps the ESOP shares, and we are to contact the company at retirement, at which point we are entitled to the shares at the then current valuation. I thought that the rules for ESOP's state that within 5 years of separation from the company, the former employee must be offered the opportunity to cash out of the plan and roll the money into another retirement vehicle. Anyone have any info. on this? >>

If it's a qualified defined contribution plan, then you are correct. Under normal circumstances the plan is required to distribution your account balance within one year following the later of your retirement, death or disability. It is required to do so in the fifth year following separation for other reasons. However, if any of the shares in your account were purchased through loan proceeds (and some plans borrow to buy company shares), then no distribution is required until the plan repays the loan in full. Additionally, the distribution may be made in installments over five years, and for accounts over $500K even longer.

You will have to argue this out with your plan administrator. It may be this is not a qualified plan. If it's not, it can pretty much do what it wants.

Regards..Pixy