All posts in ESOP Administration

An Elegant Administration Services Platform Solution for 401(k) and ESOP Plans

Every ESOP looks for efficiencies to improve productivity on the administration side of the business and to enhance communication with employees. So you need to consider an Administration Services Platform that integrates your employees’ 401(k) and ESOP information. It is put together by Jackie Salmon and her team at OneAmerica®, an Indianapolis-based financial services company, that can trace their roots back over 140 years.

OneAmerica offers a solution to meet your needs and is led by Jackie Salmon, field vice president of consulting service. Jackie, with 27 years of ESOP experience and a member of our group since 2015, has taken the time to break down the benefits of this new Administration Services Platform.

The ESOP advantages OneAmerica provides are:

  1. One relationship manager for both the ESOP and 401(k) plans
  2. One plan manager for both the ESOP and 401(k) plans
  3. An optimized, responsive website
  4. Combined statements
  5. Participant call center that is based in the U.S.
  6. Consulting team that averages more than 20 years of ESOP and employee benefits experience per person
  7. A reputation of service and access that larger carriers simply cannot provide with a company rated in the top 8 percent of all insurance companies

Want to cut to the chase and speak to Jackie Salmon and her ESOP consulting team now? Pick up the phone and call 317-285-6540 or send an email to to schedule an appointment.

Leaning on the vast actuarial and employee benefits experience of the ESOP team, the design and depth of this solution weaves the power of administrative efficiency with the kind of industry-leading support that you have come to expect from OneAmerica.

Individual Benefits of the Integrated Administration Services Platform offered by OneAmerica.

OneAmerica can accommodate servicing multiple plan types while offering a single experience for plan sponsors and participants. Their technology was built for the specialized needs that ESOP and 401(k) plans require.

Consider the following advantages:

  • Same Relationship Manager for Both Plans

Having one central point of contact with a wealth of experience in both ESOP and 401(k) benefits is an efficiency that is included in the Administration Services Platform approach. Having a single individual available to you that understands the scope and detail of your company’s interaction with employee ESOP benefits and 401(k) plans and can assist you in answers to questions is invaluable.

  • Same Plan Manager for Both Plans

Having one Plan Manager includes some of the same advantages we spoke about regarding having a single Relationship Manager for both ESOP and 401(k) plans. There are efficiencies in communication and narrowing of administrative overhead that allow for more stability and a streamlining of needed contacts. If needed, your Plan Manager can call in high-level consultants for answers to the big questions of distribution, diversification or re-shuffling.

  • Employee-Facing Website

Along with the Integrated Administration Services Platform comes a web portal that allows your employees, once logged in, to see everything from the value of their ESOP holdings to the performance of their 401(k). This kind of instant availability of information gives employees confidence and further cements their feelings of ownership in the company and control of their own futures.

  • Combined Statements

While separate statements were always made available to employees of ESOP companies, the combination of these statements within the Administration Services Platform and the instant availability of account balances within the dedicated web interface simplifies the process. By utilizing your web portal, your employees can access the vital information in both their ESOP and 401(k) plans at the same time.

  • Call Center for Both Plans

Let’s face it. Employees will always have questions about their plans, and your office doesn’t have time to field those calls. OneAmerica has solved this issue in a way that gives employees someone knowledgeable to answer statement questions or talk about eligibility and ESOP payouts so your administrative staff can continue their work uninterrupted.

  • Consulting Team at Your Service

The OneAmerica ESOP consulting team averages more than 20 years of experience per person, and has helped hundreds of ESOP plans to understand their ESOP options and their employee benefits. They understand your business’ unique needs and tailor planning to give you options you can be confident in.

  • Ratings Strength.

OneAmerica has been recognized for overall strength from A.M. Best, and Standard & Poor’s, the industry’s leading credit rating agencies. These agencies provide independent, third-party evaluations of the financial strength and claims paying ability of the insurance companies of OneAmerica. (Read more on the OneAmerica website.)

Why Bundle the Administration for 401(k) and ESOP plans into the Integrated Administration Services Platform offered by OneAmerica?

  • Having multiple vendors instead of a single point of contact can create confusion and block the flow of needed information.
  • Part of the fiduciary responsibility of your company is employee education. Centralizing and streamlining this educational process gives the employees one source of accurate information rather than competing sources.
  • Compliance testing is a requirement. By bundling the plans with the OneAmerica, you can benefit from the inherent efficiencies of integrated testing as the plans exchange information for specific required tests.
  • The Integrated Administration Services Platform allows for a single provider to deal with the processing of distributions in the unfortunate event of an employee death, or separation from the company.


Get Streamlined Employee Benefits Administration and Simplify Your Processes with the Administration Services Platform.

Enjoy the simplicity of dealing with just one provider for your ESOP AND 401(k) plans!

OneAmerica gives your employees the ability to access their plan balances and details online or over the phone through their knowledgeable U.S. based call center!

Want to know more? Call Jackie Salmon and the OneAmerica ESOP consulting team now at 317-285-6540 or send an email to to schedule an appointment.


*OneAmerica is the marketing name for the companies of OneAmerica.

Products issued and underwritten by American United Life Insurance Company® (AUL), a OneAmerica company. Administrative and recordkeeping services provided by McCready and Keene, Inc. or OneAmerica Retirement Services LLC, companies of OneAmerica which are not broker/dealers or investment advisors. Provided content is for overview and informational purposes only and is not intended and should not be relied upon as individualized tax, legal, fiduciary, or investment advice. ESOP Marketplace is not an affiliate of any OneAmerica company. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.



ESOP in Practice: How Does it Really Work?

If you didn’t read my last article, you may want to check the September/October issue of BoxScore to get the background on the pros and cons of establishing an employee stock ownership plan (ESOP). If you did, you have a good sense for the concepts but are probably a little fuzzy on how it actually works. The goal of this article is to give you a sense of what is involved in actually putting an ESOP into place.

A good way to think about an ESOP is using a red light/green light analogy. You’ve thought about it, are open to the concept, and now you want to take the next step (the lights are still green). What should you do next?

The best way to proceed is to engage with a sell-side ESOP adviser. This person will perform what is known as a feasibility analysis, which will take into account valuation, cash flows, debt repayment, compensation levels, and other factors to see if a deal even makes

sense. This feasibility analysis will help you as a seller understand what you will get from the sale of your stock, as well as the impact on the company and the employees. Assuming that the lights are still green, this preliminary study will roll into plan design, transaction structure, and implementation.

Plan design will involve your goals and objectives with respect to such things as benefit levels, vesting, eligibility, whether credit for prior service will be given, and other factors. It will also consider other benefit plans that might exist, what will happen to those plans,

and whether there are any other administrative or regulatory issues to consider. While the plan can be amended at a later date, some of the decisions that are made in the design phase can have a significant impact on the transaction structure, as well as the implications of

the post-transaction implementation.

Transaction structure will involve such things as the proposed sale price to the ESOP, the amount of bank financing that will be sought, the terms of any seller financing, and other factors. This stage also involves modeling of the expected benefit levels of the ESOP based on the contributions to be made post- (and sometimes pre-) transaction. Your sell-side adviser will generally model all of these factors into a proposed structure, and assuming the overall proposal meets with your approval, you can move to the implementation phase.


Making the Transaction

Mechanically, an ESOP transaction is like any other sale transaction, in that there is an offer, an acceptance, a due diligence

period, and the execution of transaction documents. These documents often consist of a stock purchase agreement, employment agreements, seller notes, and the like. The primary difference between an ESOP transaction and a non-ESOP transaction is that an ESOP deal involves the sale of stock to a trust. Therefore, in order to proceed with a sale of stock to an ESOP, a trust must be formed and a trustee appointed. The trustee can be anyone who is independent of the transaction. Most sellers opt to hire a third-party

transactional trustee for the sole purpose of representing the interests of the ESOP in the transaction. That trustee will then

retain the services of a financial adviser to perform an appraisal of the company and report a range of value to the trustee.

Once the trust is formed and the trustee is retained, an offer to sell the stock is tendered to the trustee. The trustee, in consultation with his financial adviser, will respond to the offer, and a negotiation will occur. When both parties are satisfied with the material terms of the transaction, a letter of intent will be signed, and the transaction will move to the due diligence phase.


Due Diligence

During due diligence, the trustee team will request a significant number of corporate documents to facilitate legal, accounting, and operational due diligence. While this due diligence will generally be less onerous than it would be with a public company or private equity buyer, response to due diligence requires patience and thought. During this process, transaction documents are drafted,

bank financing is coordinated, and final negotiations and transaction structuring occur. At closing, signed documents are

exchanged, monies are transferred, and the ESOP officially becomes a shareholder of the company.

Post-closing, the company will make debt service payments to the bank and the selling shareholder. Typically, if there is bank financing involved, the bank will allow for interest-only payments on the seller notes until the term debt to the bank is repaid. Following this repayment, the seller notes can begin to be amortized. After the seller notes have been repaid, the company will typically cash out any warrants that have been issued as a yield enhancement to the seller notes.


Time for Growth

From the ESOP’s perspective, it will begin to repay its obligations through contributions made by the company. When this occurs, shares are released to the participants, and their account balances grow. The concept is similar to how equity grows in your home as you make your mortgage payments and a portion is used to repay the principal. The participants get an allocation based on their W-2 and subject to vesting and eligibility requirements.

For example, a person who makes $100,000 per year receives twice as much of an allocation as a person who earns $50,000. Thus, the participants’ accounts grow in the following two ways: 1) by allocation of shares as the debt is repaid, and 2) by the increase in the value of the stock. These contributions are tax-deductible to the corporation, and it is through these contributions that the repayment of debt ends up happening on a pretax basis.

The debt to the bank and the shareholders will generally be repaid over the shortest possible period of time without putting an undue burden on the company. The allocation of shares to the participants, on the other hand, will generally be over a longer period than the repayment of the bank debt or seller note. There are three primary reasons for this: 1) As the ESOP is a retirement plan, the goal is

typically to provide a long-term benefit to the employees, not a short-term benefit; 2) the longer allocation period encourages longevity and tenure of the workforce (i.e., they have to be there longer to get more); and 3) a longer allocation ensures that shares will be available for allocation to new employees in the future. Furthermore, this enhances the ability to sell the ESOP as an additional employee benefit when recruiting.


Enhanced Performance

While the tax benefits to both the sellers and the company can be substantial, what really makes an ESOP work to maximum effect is the enhanced performance that often occurs when the employees have a vested interest in the company’s performance. Numerous studies have confirmed that companies in which ownership is shared with the employees outperform those that do not. Many ESOP

companies end up branding themselves as employee-owned, and they effectively communicate the benefits of employee ownership to all of their stakeholders. This has resulted in numerous examples of companies where performance has improved and the workforce has ended up with a far greater economic benefit than they would have achieved elsewhere.

Other than an ESOP, no transition vehicle or strategy currently available affords the combination of flexibility, tax benefits,

employee engagement, and preservation of corporate culture. From the seller’s perspective, the taxes on the sale of stock can be deferred or avoided altogether. In exchange for financing the transaction over time, the seller can receive a substantial rate of return on this financing, often in excess of the expected rate of return were cash proceeds to be invested in a bond or stock portfolio. From the company’s perspective, the transaction can be paid for with pretax dollars, and if the ESOP ends up owning 100 percent of the stock, the company will never again have to pay corporate tax or make a tax distribution.

From the employee’s perspective, they receive a meaningful financial incentive to help the company grow and prosper in the future, and they get to work for a company whose culture is intact. With more than 7,000 ESOP-owned companies in existence in the United States today, it is a strategy that should be considered by most closely held companies seeking an ownership transition.

Click to download this article as a PDF.


That Age-Old Question: Is an ESOP Right for Me?

That Age-Old Question: Is an ESOP Right for Me?

To sell to an ESOP or not sell to an ESOP, that is the question.  And the answer lies within an expertly prepared feasibility study.  While ESOPs are a fantastic tool for exiting business owners, it is not a one-size-fits-all solution.  Whether it’s for an initial sale to the ESOP or for a subsequent sale to an existing plan, an ESOP is best utilized when its installation is based on sound decisions after thorough and thoughtful research.

R.K. Schaaf Associates, Inc. (RKS) was founded in 1975 by Rainer K. Schaaf primarily to provide ESOP sponsors with a third party recordkeeping firm that focuses on the unique nuances relating to these plans.  Although Mr. Schaaf has since retired, RKS continues to focus on the technical and operational aspects of ESOPs.  Our staff is dedicated to providing our clients with all the information they need to make informed decisions – including the decision that an ESOP may not be right for them.

RKS can help companies determine whether an ESOP is feasible by preparing an insightful examination of the impact of the proposed transaction on the company, its employees, and the ESOP.  Corporate structure, demographics and exit strategy all need to be “put under the microscope” so to speak before implementing an ESOP.  RKS will prepare a Feasibility Study tailored specifically to address a client’s needs, and offers three different levels of study to accommodate those needs, one of which provides a side-by-side comparison of an ESOP versus other major liquidity or corporate financing alternatives, including a private auction, negotiated sale, debt-recapitalization, or liquidation.

In summary, the most important step the company can take before implementing an ESOP is to analyze whether the plan would be feasible.  Once an analysis is completed and it is determined an ESOP is feasible, a company is likely to experience many years of enhanced employee productivity, less turnover and a greater bottom line.  The horror stories you may hear about ESOPs are usually a direct result of poor planning and research in the initial stages.  Our goal is to make sure that companies thoroughly plan for their ESOP so that it will be a success story.


For more information about R.K. Schaaf Associates, Inc., visit our website at or at  For more information about our feasibility studies, contact Wendy Lankes at (800) 678-8337 or


R.K. Schaaf Offers Free Online Financial Tools

R.K. Schaaf Offers Free Online Financial Tools

R.K. Schaaf Associates, a financial services firm with over 3 decades’ worth of experience in ESOP administration and other services, offers a number of free financial tools on its website for the benefit of current and prospective clients.

One of the tools is a handy loan calculator which allows a visitor to quickly calculate participant loan amortization. A participant loan is subject to a number of requirements that, if broken, can lead to serious tax consequences, such as potentially significant excise taxes. In some cases, the entire benefits plan could be disqualified as a result of an improper participant loan. The calculator allows you to determine whether your loans meet IRS requirements.

R.K. Schaaf is represented on ESOP Marketplace by a number of its expert ESOP advisors.


ESOP Recordkeeping and Consulting

Sue Ledingham has been immersed in the qualified plan recordkeeping and consulting industry, focusing primarily on the unique technical aspects of employee stock ownership plans for over 35 years.

Sue’s depth of knowledge starts with the preliminary feasibility analysis necessary to determine whether an ESOP is the right vehicle for an employer, and carries through the entire life of an ESOP, to plan termination and final distributions.

Sue Ledingham was interviewed for the ESOP Advisor Hall of Fame in June 2012. Read her interview online at


First Bankers Trust Services

As an ESOP advisor, Danielle Montesano is involved in:
  • Buying and selling of plan assets
  • Ensuring that the ESOP loan terms are reasonable and coordinating the scheduled debt service payments
  • Hiring the plan advisors and evaluating their opinions
  • Voting and/or accepting direction to vote shares of company stock for shareholder meetings
  • Monitoring the ESOP’s compliance with the plan and loan documents, trusts, and all applicable laws and regulations