ESOP – Privately Held Company Stock

Submitted by Tracy Hawbaker on Mon, 2022-07-18 15:58

I have a prospect who has approximately $2.5 million dollars in company (employee owned) stock . A large portion of that is held in an ESOP and some was also bought by the employee. There are no other investments within the ESOP. My thought is that we need to determine the basis of the shares before coming up with a plan for retirement (R/O IRA vs. taxable account). What things should be considered? Does this differ because it is privately owned and not a publicly traded company?



Submitted by Alan - IRA critic on Mon, 2022-07-18 16:47

  • First off, the plan administrator should know whether NUA is feasible for these shares. While privately owned shares are eligible, such plans are more likely to have restrictions that make use of NUA impossible. The following article goes into considerable depth on private company ESOP plans. It should also be noted that the LSD requirements include other similar type plans such as a 401k plan (but not a DB plan).
  • https://www.kitces.com/blog/net-unrealized-appreciation-nua-employee-stock-ownership-plans-esop-ca


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