Your ESOP Individual Account Statement

Transcription

1 Your ESOP Individual Account Statement Barbara M. Clough, QPA, QKA Joel Davis Florence Zabarsky Director, Plan Administration Director-Consulting President Moderated by: Brian D. Bornino, CPA/ABV, CFA, CBA Director of Valuation Services

2 Entry Date This is the date on which you enter the plan. You will enter the Plan following your completion of the age and service requirements as specified in the Plan Document. 2

3 Sample Company Stock Ownership Plan STATEMENT FOR Sample Participant Stock Cash Account Entry Date: January 1, 2007 Account (Shares) Beginning Balance $ 10,

4 Contributions Your allocation of the cash contribution based on the ratio of your eligible compensation to the total eligible compensation of all employees. 4

5 Sample Company Stock Ownership Plan STATEMENT FOR Sample Participant Stock Cash Account Entry Date: January 1, 2007 Account (Shares) Beginning Balance $10, Contributions 4,

6 Shares Released Your allocation of the shares released from the acquisition loan as determined based upon the principal and interest payments made by the Plan Sponsor. Shares are allocated to your account in the ratio of your eligible compensation to the total eligible compensation of all employees. 6

7 Sample Company Stock Ownership Plan STATEMENT FOR Sample Participant Stock Cash Account Entry Date: January 1, 2007 Account (Shares) Beginning Balance $10, Contributions 4, Shares Released

8 Forfeitures Accounts of former participants who are not 100% vested are forfeited and reallocated to remaining eligible participants. For active participants, this amount represents your share of the reallocated forfeitures which were allocated to your account for the plan year. For former participants, this amount represents the non-vested portion of your account which has been forfeited. 8

9 Sample Company Stock Ownership Plan STATEMENT FOR Sample Participant Stock Cash Account Entry Date: January 1, 2007 Account (Shares) Beginning Balance $10, Contributions 4, Shares Released Forfeitures

10 Gains/Losses This amount represents the gain on your ESOP Cash Accounts during the plan year. 10

11 Sample Company Stock Ownership Plan STATEMENT FOR Sample Participant Stock Cash Account Entry Date: January 1, 2007 Account (Shares) Beginning Balance $10, Contributions 4, Shares Released Forfeitures Gains/Losses

12 Allocated Dividends Your allocation of stock dividends based on the ratio of your stock balance to the stock balance of all employees. 12

13 Sample Company Stock Ownership Plan STATEMENT FOR Sample Participant Stock Cash Account Entry Date: January 1, 2007 Account (Shares) Beginning Balance $10, Contributions 4, Shares Released Forfeitures Gains/Losses Allocated Dividends

14 Unallocated Dividends Your allocation of stock dividends based on the ratio of eligible compensation to the eligible compensation of all employees. 14

15 Sample Company Stock Ownership Plan STATEMENT FOR Sample Participant Stock Cash Account Entry Date: January 1, 2007 Account (Shares) Beginning Balance $10, Contributions 4, Shares Released Forfeitures Gains/Losses Allocated Dividends Unallocated Dividends

16 Shares Repurchased When participants receive distributions, their stocks are sold and transferred to a cash position within the Plan. This amount represents a transfer from your cash account to your stock account in order to purchase the stock from distributed participants. 16

17 Sample Company Stock Ownership Plan STATEMENT FOR Sample Participant Stock Cash Account Entry Date: January 1, 2007 Account (Shares) Beginning Balance $10, Contributions 4, Shares Released Forfeitures Gains/Losses Allocated Dividends Unallocated Dividends Shares Repurchased -11,

18 Shares Sold When participants receive distributions, their stocks are sold and transferred to a cash position within the Plan. This amount represents the amount sold to fund the distributions to participants. 18

19 Sample Company Stock Ownership Plan STATEMENT FOR Sample Participant Stock Cash Account Entry Date: January 1, 2007 Account (Shares) Beginning Balance $10, Contributions 4, Shares Released Forfeitures Gains/Losses Allocated Dividends Unallocated Dividends Shares Repurchased -11, Shares Sold

20 Distributions This value represents the amount distributed to you from your ESOP account. 20

21 Sample Company Stock Ownership Plan STATEMENT FOR Sample Participant Stock Cash Account Entry Date: January 1, 2007 Account (Shares) Beginning Balance $10, Contributions 4, Shares Released Forfeitures Gains/Losses Allocated Dividends Unallocated Dividends Shares Repurchased -11, Shares Sold Distributions

22 Balances Ending Balance - The ending balance of your ESOP Shares Accounts and Cash Accounts as of the last day of the plan year. Market Value - The per share value of stock as determined by an independent appraiser. Value of Company Stock - The value of your shares account as of the last day of the plan year based on the December 31 Market Value Per Share. Total Account Value - The value of your ESOP Share Accounts and Cash Accounts as of the end of the year. 22

23 Sample Company Stock Ownership Plan STATEMENT FOR Sample Participant Stock Cash Account Entry Date: January 1, 2007 Account (Shares) Beginning Balance $10, Contributions 4, Shares Released Forfeitures Gains/Losses Allocated Dividends Unallocated Dividends Shares Repurchased -11, Shares Sold Distributions Ending Balance 4, Market Value Per Share: $ Value of Company Stock Account: $ 99, Total Value of Plan Account: $ 103,

24 Vesting Vested Percentage - The percent of your account that is vested and non-forfeitable. Total Vested Value - The amount that is vested and non-forfeitable as of the end of the plan year. 24

25 Sample Company Stock Ownership Plan STATEMENT FOR Sample Participant Stock Cash Account Entry Date: January 1, 2007 Account (Shares) Beginning Balance $10, Contributions 4, Shares Released Forfeitures Gains/Losses Allocated Dividends Unallocated Dividends Shares Repurchased -11, Shares Sold Distributions Ending Balance 4, Total Value of Plan Account: $ 103, Vested Percentage: 80 % Vested Value of Plan Account: $ 82,

26 Distributions 5 Year Wait Participant Terminates 11/15/2011 Valuations are completed for 2011, 2012, 2013, 2014 and 2015 After the 2015 Valuation is complete, in 2016 distributions will commence 26

27 Distributions Installments 5 (or possibly 6) installments Over a 5 year period Each installment is recalculated 27

28 Distributions Sample Participant Prior Cash Balance $4, Vested Percentage 80% Vested Balance $3, Non-vested Balance Prior Share Balance Vested Percentage 80% Vested Balance Non-vested Balance

29 Distributions Sample Participant Vested Balance $3, /5 of balance $ Vested Balance /5 of balance share price $ $15, st Installment $ $15, = $16,

30 Sample Company Stock Ownership Plan STATEMENT FOR Sample Participant Stock Cash Account Entry Date: January 1, 2007 Account (Shares) Beginning Balance $4, Contributions Shares Released Forfeitures (874.88) ( ) Gains/Losses Allocated Dividends Unallocated Dividends Shares Repurchased Shares Sold Distributions (699.90) ( ) Ending Balance 2, Total Value of Plan Account: $ 63, Vested Percentage: 100 % Vested Value of Plan Account: $ 63,

31 Distributions Sample Participant Vested Balance $2, /4 of balance $ Vested Balance /4 of balance share price $95.00 $15, st Installment $ $15, = $15,

32 Sample Company Stock Ownership Plan STATEMENT FOR Sample Participant Stock Cash Account Entry Date: January 1, 2007 Account (Shares) Beginning Balance $2, Contributions Shares Released Forfeitures Gains/Losses Allocated Dividends Unallocated Dividends Shares Repurchased Shares Sold Distributions (699.90) ( ) Ending Balance 2, Total Value of Plan Account: $ 49, Vested Percentage: 100 % Vested Value of Plan Account: $ 49,

33 Distributions Lump Sum Distribution Cash Shares - with Company Note Note often has Company making annual payments to the Participant Interest is paid on note balance Fully taxable in year of distribution, unless rolled over Not common currently, nor recommended 33

34 Sample Company Stock Ownership Plan STATEMENT FOR Sample Participant Stock Cash Account Entry Date: January 1, 2007 Account (Shares) Beginning Balance $4, Contributions Shares Released Forfeitures (874.88) ( ) Gains/Losses Allocated Dividends Unallocated Dividends Shares Repurchased Shares Sold Distributions (3,499.51) ( ) Ending Balance Total Value of Plan Account: $ 0.00 Vested Percentage: 80 % Vested Value of Plan Account: $

35 Distributions Diversification Distribution 10 Years of Participation and Age 55 Can Withdraw up to 25% of share balance 35

36 Distributions Sample Participant Cash Balance $4, Vested Share Balance % of balance share price $ $24,

37 Sample Company Stock Ownership Plan STATEMENT FOR Sample Participant Stock Cash Account Entry Date: January 1, 2007 Account (Shares) Beginning Balance $4, Contributions Shares Released Forfeitures Gains/Losses Allocated Dividends Unallocated Dividends Shares Repurchased Shares Sold Distributions 0.00 ( ) Ending Balance $4, Total Value of Plan Account: $75, Vested Percentage: 100 % Vested Value of Plan Account: $75,

38 Reshuffling Aliases Segregation, conversion out of stock, mandatory divestment What is it? Mandatory transfer into or out of accounts Unequal proportions of stock and cash in all participant accounts 38

39 Reshuffling Why is it used? Move terminated participants out of stock Provide shares for ongoing allocations Comments Must have cash/other investments in the plan or make contributions/s distributions May accelerate repurchase obligation funding 39

40 Reshuffling Account of terminated participant Company Stock Other Segregated Total Shares Value Investments Investments Account Value Beginning Balance on January $154, $7, $0.00 $162, Stock Value Gain / (Loss) , (1,353.34) 2, Company Contributions Dividends / Interest , , Reallocated Shares ( ) (84,830.62) 50, , Distributions / Transfers (58,657.34) 0.00 (58,657.34) Forfeiture Amount Ending Balance on December $73, $2, $33, $110,

41 Reshuffling Active participant Company Stock Other Segregated Total Shares Value Investments Investments Account Value Beginning Balance on January $193, $10, $0.00 $204, Stock Value Gain / (Loss) , , Company Contributions , , , Dividends / Interest , , Reallocated Shares , (28,071.37) Distributions / Transfers (2,148.92) 0.00 (2,148.92) Forfeiture Amount Ending Balance on December $248, $ $0.00 $248,

42 Rebalancing What is it? Mandatory transfer into or out of accounts Same percentage of stock and cash in all participant accounts Last step of allocation process Why rebalance? Cultural reasons Haves v. have-nots situation All shares have already been allocated Repurchase obligation planning 42

43 Rebalancing Comments Must have cash/other investments in the ESOP Contributions v. S distributions analyze the effects of rebalancing on participant s accounts 43

44 Rebalancing Before Rebalancing Company Stock Account Value % Other Inv Value % Total Value Participant 1 $300,000 94% $20,000 6% $320,000 Participant 2 $200,000 74% $70,000 26% $270,000 Participant 3 $500 10% $4,500 90% $5,000 $500,500 84% $94,500 16% $595,000 After Rebalancing Company Stock Account Value % Other Inv Value % Total Value Participant 1 $269,176 84% $50,824 16% $320,000 Participant 2 $227,118 84% $42,882 16% $270,000 Participant 3 $4,206 84% $794 16% $5,000 $500,500 $94,500 $595,000 44

45 Rebalancing Sample statement Company Stock Other Total Shares Value Investments Account Value Beginning Balance on January 1 1, $300, $0.00 $300, Stock Value Gain / (Loss) Company Contributions , , Reallocated Shares Distributions Transfers ( ) (30,823.53) 30, Forfeiture Amount Ending Balance on December $269, $50, $320,

46 Stock Contributions Why stock contributions? Leveraged shares fully allocated Get shares into newer participant s accounts Non-leveraged ESOP Non-cash expense Statements Participants see contributions in shares column 46

47 Stock Contributions Company Stock Other Total Shares Value Investments Account Value Beginning Balance on January 1 1, $20, $0.00 $20, Stock Value Gain / (Loss) , , Company Contributions $2, , Reallocated Shares Distributions Forfeiture Amount Ending Balance on December 31 1, $27, $0.00 $27,

48 Questions 48

49 Contact Information Barbara M. Clough, QPA, QKA, Director, Plan Administration Blue Ridge ESOP Associates 154 Hansen Road, Suite 102, Charlottesville, VA Phone: Florence V. Zabarsky, QKA, President Zabarsky & Associates Raccoon Trail, Strongsville, OH Phone: Joel H. Davis, Director-Consulting Principal Financial Group Wayzata Blvd, Suite 211, Minneapolis, MN Phone: