Since we are closing in on the end of the year, I am going to use this as an opportunity to revisit my annual series of ESOP planning articles. A lot of the content will be the same from prior years, but I will also be updating the series for current changes and new resources of information. With that in mind, let's get started:
There are only 20 days, including today, remaining in 2008. Yes, that is right, only 20 days. For calendar year ESOPs, the 2008 plan year is almost over, and it is almost time to process the 2008 allocation. If you have not already done so, now is definitely the time to start preparing for the 2008 ESOP allocation process. Let's start by defining planning:
"Planning is one of the most important project management and time management techniques. Planning is preparing a sequence of action steps to achieve some specific goal. If you do it effectively, you can reduce much the necessary time and effort of achieving the goal.
A plan is like a map. When following a plan, you can always see how much you have progressed towards your project goal and how far you are from your destination. Knowing where you are is essential for making good decisions on where to go or what to do next.
One more reason why you need planning is again the 80/20 Rule. It is well established that for unstructured activities 80 percent of the effort give less than 20 percent of the valuable outcome. You either spend much time on deciding what to do next, or you are taking many unnecessary, unfocused, and inefficient steps.
Planning is also crucial for meeting your needs during each action step with your time, money, or other resources. With careful planning you often can see if at some point you are likely to face a problem. It is much easier to adjust your plan to avoid or smoothen a coming crisis, rather than to deal with the crisis when it comes unexpected."
ESOP planning includes planning for both the current year ESOP administration process as well as the various events that take place over the life of an ESOP. If ESOP planning is not a part of your administration process, you should schedule an ESOP planning meeting right away to get the process started. Most companies schedule planning meetings in advance and on a regular basis. You should meet at least once per year, and depending on where you are at in the planning process, you may need to meet more often. While there is no specific time that you have to conduct your meeting(s), most companies schedule them prior to the end of the plan year, at the start of the plan year, or after the annual allocation has been completed.
If you are not already, you should consider involving other members of the ESOP team (such as your internal or external recordkeeper, ESOP consultant, and ESOP counsel) in your discussions. They will be able to contribute their experience and expertise to the process as well as gain a better understanding of the timing of the allocation process and the issues that the ESOP team is facing.
Our first item of discussion will be the allocation timeline. Keep checking the One-Stop ESOP Blog for other planning segments, including plan documents, plan expenses, distributions, contributions, dividends, the appraisal, the IRS Form 5500 and the plan audit (if applicable).
The ESOP Planning process includes planning for both the current year ESOP administration process as well as the various events that take place over the life of an ESOP. This article is one in a series of ESOP Planning 2008 articles authored by Aaron Juckett. Aaron Juckett is an ESOP consultant and the founder of ESOP Insourcing LLC, an ESOP administration and consulting firm dedicated to providing ESOP companies with a first-class ESOP experience. If you need assistance with the ESOP Planning process, please call Aaron at 800-837-3112 or email him at ajuckett@esopinsourcing.com.