Employee Stock Ownership Plan

Employee Stock Ownership Plan

Do You Take Part in an Employee Stock Ownership Plan (ESOP)? Do you know the best way to diversify your retirement portfolio? Many people are now investing in physical precious metals like silver and gold to diversify their retirement assets.

An ESOP otherwise known as an Employee Stock Ownership Plan cannot be compared with other, more traditional employer sponsored retirement plans like the 403b or the 401k. Nevertheless, it is a tax-advantaged vehicle of great importance. In this article we will discuss the pros and cons of the ESOP, talk about ways to safeguard retirement assets in a failing economy and find out how precious metal investing works.

The Employee Stock Ownership Plan

The ESOP works in this way. The employer starts a trust fund. The fund shares its own stocks or designates money to buy existing shares. This type of plan is popular because it enables employees to buy into the company. The shares in the trust are allotted to the employee’s accounts, but the way that shares are allocated will differ between companies. The ESOP operates like many other employer sponsored benefits. The employee is not entitled to benefit from the ESOP account until they secure a senior position. Employees who leave the company will receive the vested stock, but the firm will buy the stock back at the going market rate.

There are two different ways that the employer supplies the benefits; leveraged and non-leveraged.

ESOP Nonleveraged

ESOP Leveraged

The Employee Stock Ownership Plan has tax advantages because the stock contributions are tax-deductible for the issuing company. The employee will not be taxed on received contributions and the contributions can be rolled-over into a qualified retirement plan such as an IRA. Employees who rollover their distributions will avoid income tax and capital gains tax.

The Rules and Limitations of ESOP Rollovers

ESOP distribution rules vary, however, they can be rolled over into other retirement plans. Employees who have this type of retirement plan should read the plan summary to learn more about specific distribution rules.

Distributions are mandatory on the first of April after turning 70 1/2 and penalties are imposed for taking distributions before reaching retirement age (much like the 401k) The company may award the distributions in cash, stocks or a mixture of both. Employees can cash in the stocks irrespective.

Those who invest the ESOP proceeds into a self-directed or traditional IRA (other than ROTH) or employees who roll the money into another retirement investment plan are not liable to pay tax. Tax will be paid when the money is eventually withdrawn.

Plan Type Sponsorship 2018 Contribution Limit Roth Option? Allow Gold Stocks? Allow Gold ETFs? Allow Gold Bullion
401(k) Private Employer $18,500 / $55,000 Yes Maybe Maybe No
Solo 401(k) Self-employed $18,500 / $55,000 Yes Yes Yes Yes
Keogh Plan Self-employed or Unincorporated Employer $55,000 No Maybe Maybe No
403(b) Government or Non-profit Employer $18,500 / $55,000 Yes Maybe Maybe No
457(b) Government or Tax-exempt Employer $18,500 / $55,000 Yes Maybe Maybe No
Simple IRA Private Employer $12,500 / $55,000 Yes Yes Yes Maybe
SEP IRA Business Owners & Self-employed $55,000 Yes Yes Yes Maybe
Profit Sharing Plan Private Employer $55,000 No Maybe No No
Money Purchase Plan Private Employer $55,000 No Maybe Maybe No
Annuity Individual None No Maybe Maybe No
ESOP Private Employer Varies Yes Maybe No No
SARSEP Private Employer $55,000 No Yes Yes Maybe
Self Directed IRA Individual $5,500 / $6,500 Yes Yes Yes Yes
Traditional IRA Individual $5,500 / $6,500 Yes Yes Yes No
Precious Metals IRA Individual $5,500 / $6,500 Yes Yes Yes Yes
Thrift Savings Plan (TSP) Government or Military $5,500 No No No No

Incorporating Gold into an Employee Stock Ownership Plan

The majority of people with an ESOP are not permitted to add gold investments to the plan. However, some may have been granted diversification rights via their employer. This kind of pension plan will contain no “paper gold” or physical gold unless you work for a gold mining company.

Rollover an ESOP to a Precious Metals IRA

Setup an ESOP rollover and you are firmly in control of all retirement funds. You can open new tax-free investments and consider precious metal investing.  However, those who are part of employer-funded profit sharing plans, like the ESOP will find their investment options limited. In reality, the self-directed IRA is more flexible. ESOPs are vulnerable. If the employer goes bankrupt your contributions may be lost.


The Advantages of Dedicating a Percentage of a Retirement Portfolio to Precious Metal

Investing in gold is safe and easy. Purchase silver, palladium, platinum and gold to safeguard your retirement assets against inflation and the volatile stock market. Gold is a superb hedge, plus there is plenty of potential for financial growth. Analysts predict further gold price hikes; hence investors are keen to buy gold. Your date of retirement and risk tolerance will influence the amount of precious metals you buy to add to your retirement portfolio. Nevertheless, open a self-directed IRA and you receive tax-benefits on any precious metals investments.

Choosing the Ideal Gold IRA Company for a ESOP Rollover

Many people with an Employee Stock Ownership Plan ask us to recommend a reliable IRA firm. We are independent advisers who review GOLD IRA companies. Should you rollover your ESOP shares? We hope the content in this article will help you to make an informed decision.


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