Articles by Judy Kornfeld

An Introduction to ESOP Repurchase Obligations
Repurchase obligations arise out of certain tax code rules governing distributions from ESOPs and diversification rights available to participants. This article provides a "primer" on the rules and a brief discussion of basic issues.

Funding ESOP Repurchase Obligations: A Step-By-Step Planning Approach
The best way of funding repurchase obligations depends upon the unique characteristics of the particular company and will often combine several funding methods. This article presents a step-by-step approach to examining the options available to ESOP companies for managing and funding the repurchase obligation, the result of which can be a comprehensive plan for meeting the liquidity needs associated with the ESOP.

ESOP Distributions: The Cash-Out Dilemma
An ESOP company faces a dilemma when it chooses to delay distributions to ESOP participants who have terminated employment: there is no legal authority for how ESOP account balances that are being held pending distribution should be handled. There are several different options, each with its own advantages and disadvantages. This article describes each option and makes recommendations.

ESOP Repurchase Obligation Issues in S Corporations
S corporation status does not directly affect the amount of a company's ESOP repurchase obligations, but most ESOPs in S corporations hold large percentages of company stock. This is because the tax advantages associated with S corporation status vary directly with the percentage of the company's stock owned by the ESOP. Since ESOP repurchase obligations also vary directly with the amount of stock owned by the ESOP, S corporations with ESOPs tend to have high repurchase obligations. Planning for the repurchase obligations is therefore more important and more challenging. This article focuses on several ESOP repurchase obligation issues as they relate to S corporations.

Redeeming vs. Recirculating ESOP Shares
One of the fundamental decisions in repurchase obligation planning is whether repurchases will be handled through the ESOP, or whether the company will redeem the shares. This article explores the mechanics and implications of each of these approaches.

Judy Kornfeld's "ESOP Repurchase Insights"

Judy Kornfeld writes a column titled "ESOP Repurchase Insights" for the Web site of the National Center for Employee Ownership (see below). Read the column at the NCEO's site.

Recent Presentations

Forecasting ESOP Repurchase Obligations (277K PDF file)
This presentation from The ESOP Association's 2002 Repurchase Obligation Seminar discusses the process of doing an ESOP repurchase obligation study, the challenges involved in developing good assumptions, and some tips for getting good results.

Funding ESOP Repurchase Obligations (324K PDF file)
This presentation from The ESOP Association's 2000 Repurchase Obligation Seminar reviews the most commonly used methods of funding ESOP repurchase obligations and examines their advantages and disadvantages.

Nuts & Bolts of Forecasting and Funding Methods (142K)
This presentation from The ESOP Association's 2004 PA-DE-NY-NJ Multi-State Conference reviews the "nuts and bolts" of forecasting repurchase obligations and explores different funding methodologies. The advantages and disadvantages of hiring a consultant to complete your repurchase obligation study versus completing it on your own are also discussed.

Related Organizations

The National Center for Employee Ownership (NCEO) is a private, nonprofit membership and research organization that serves as a leading source of information on ESOPs, broadly granted employee stock options, and employee participation programs.

The ESOP Association is the national, nonprofit association of companies with ESOPs and service providers with commitment to ESOPs and is the leading advocacy group for ESOPs in the United States.

The Ohio Employee Ownership Center (OEOC) OEOC is a university-based program which provides information and technical assistance to retiring owners, buyout committees, labor unions, managers and community-development organizations interested in exploring employee ownership.

Back to Top