Distributions are required to be made in employer securities and put options are required for distributions of nonpublic securities. Terminated employees may hold stock and cause problems. The sale to an ESOP of closely-held employer securities may be recharacterized as a constructive dividend. Creation of an ESOP may result in loss of control of a company by the controlling shareholder. The Department of Labor has begun to closely scrutinize ESOP transactions, especially with respect to the price paid by the ESOP for the stock it acquires.
Future legislation can change rules and limit benefits.
An ESOP must be established and maintained for the exclusive benefit of its participants and beneficiaries.