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ESOP Planning & Administrative Timeline

When planning for the coming year, it’s helpful to have an ESOP administrative timeline to help manage the ESOP allocation process. Read on for details.
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As you wrap up the current-year employee stock ownership plan (ESOP) record-keeping and Form 5500 filing, now is the perfect time to start planning for the coming year. It’s crucial to develop a detailed plan with all responsible parties to help ensure the record-keeping and all related deliverables are completed timely. One of the best tools to have in place to facilitate the annual process is the ESOP administrative timeline. While your ESOP administrative timeline can range in complexity and formatting, it’s simply a tool to help you manage the ESOP allocation process and help ensure all parties are accountable to complete their individual tasks. This simple timeline could be maintained in Excel or Word. The administrative timeline should list basic information such as deliverables, responsible parties, and due dates and can be as detailed as you like.

Common Format of the ESOP Administrative Timeline

  • Deliverable or item to be completed
  • Responsible party (company, record-keeper, trustee, valuation firm, auditor, etc.)
  • Date task is scheduled to be completed
  • Regulatory deadlines

If you’re getting ready to prepare your ESOP administrative timeline for the first time, we suggest identifying the major deliverables and due dates and working your way backward. This helps ensure the most important aspects of the process (allocation reports, participant statements, Form 5500, distribution payments, etc.) are top of mind. Once these major deliverables are identified, you can work backward to determine how much time you will need to complete the process and the steps it will take to reach that final goal.

As mentioned above, the level of detail in your administrative timeline is flexible and can vary from year to year. Therefore, it’s important to take the time before the new plan year begins to plan out the steps for the upcoming year and help ensure every party is on the same page.

The sample ESOP administrative timeline below is a very basic example of the type of information that should be included.

Sample ESOP Administrative Timeline
Description of ItemResponsible PartyDateNotes
Client Assistance ListRecord-KeeperJanuaryRecord-keeper to provide list of information needed to prepare annual ESOP allocation
Finalization of Company Financial StatementsCompany AuditorMayAuditor to finalize the year-end financial statements once ESOP-specific entries are included
Finalization of ESOP Valuation ReportValuation FirmMayValuation firm to finalize the annual ESOP valuation report after reviewing final financial statements
Annual ESOP AllocationRecord-KeeperJuneRecord-keeper to provide allocation report, participant statements, distribution forms, and compliance testing
ESOP Form 5500Record-KeeperJuly 31Prepare extension (if needed)

In general, the more details you can include on your ESOP administrative timeline, the more organized and prepared you will be for the coming plan year. If you want to include more information on your administrative timeline, here are some additional items to consider:

  • Preparing and distributing preliminary diversification forms
  • Preparing and distributing required minimum distribution forms
  • Providing census information to determine eligibility
  • Computing the release of ESOP shares and preparing the related accounting entries
  • Completion of ESOP plan audit, if applicable
  • Distributing participant statements and distribution forms
  • Processing final diversification elections
  • Payment of distributions according to the terms of the distribution policy
  • Filing Form 5500 and distributing Summary Annual Report
  • Funding of payment on internal ESOP loan(s)
  • Distribution of Forms 1099-R
  • Update plan document and summary plan description
  • Incorporating current-year data into sustainability study

For more information, reach out to a professional at FORVIS or submit the Contact Us form below.

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