Question

The value of employee securities in an ESOP must be determined:

a. at least annually, but more frequently, if purchased from a disqualified person.
b. as provided for in the plan document, but at least biannually.
c. at the time a distribution is made from the plan.
d. at the time each purchase of securities is made only if demanded by the lender and a committee representing the plan participants.

Answer 1

The correct answer is option a. at least annually, but more frequently, if purchased from a disqualified person.

Step-by-step explanation:

The value of employee securities in an Employee Stock Ownership Plan (ESOP) must be determined at least annually. However, there can be more frequent valuations if securities are purchased from a disqualified person. The purpose of this regular valuation is to ensure that the shares owned by the employees' retirement plan reflect their fair market value, which is necessary for the plan to comply with the Employee Retirement Income Security Act (ERISA) and for accurate reporting to the IRS and plan participants.

Some ESOP plans may also require valuations at specific events, such as when there is a distribution made from the plan or if the plan's documents stipulate a different frequency or timing for the valuation. It is essential to refer to the specific plan document for exact details on valuation frequency and conditions.