“When do I get in?” You must be at least age 21, worked for Oftedal for one (1) year and earn at least 1,000 hours in a Plan Year (Jan 1 – Dec 31). You are automatically enrolled next entry date (Jan 1 or July 1)
Valuation “What’s my stock worth?” An annual valuation of the company determines what your ESOP shares are worth. Oftedal’s valuation company is Chartwell Capital Solutions based in Minneapolis, MN. Chartwell reviews audited financials and performs an in depth valuation of the company as a going concern. Chartwell reviews such items as management structure, equipment and property, market valuations, future workload, budget projections, debt load, etc before determining a fair market stock value. The ESOP Trustee’s have sole responsibility for setting the stock value each year.
Contribution – A contribution is the amount of cash the Board of Directors decides to pay into the plan each year. A contribution can be in stock, cash or both. A contribution is based, in part, on annual company profits. The better the company does, the greater the annual contribution can be. Contributions are funded entirely by the company and COSTS THE EMPLOYEE NOTHING!!!!
Allocation “How much do I get?” Allocation is the process of dividing the contribution to all eligible ESOP participants. Yearly allocation is based on your gross earnings as a % of total eligible payroll for that plan year. Your % of total eligible payroll multiplied by the contribution amount equals your yearly allocation. To receive an allocation you must work 1,000 hrs during plan year and be an active ESOP participant/employee on September 30. Principal, our third-party ESOP administrator, oversees annual ESOP allocations.
Vesting “How much do I have?” Vesting means ownership of your ESOP account. Vesting is based on years of service. Employees become 100% vested after five years, 60% vested 4-5 yrs, 40% vested 3-4 yrs and 20% vested 2-3 yrs. If you leave before becoming fully vested, you’ll experience a forfeiture. To earn vesting credit you must worked at least 1,000 hours in a plan year. Forfeited amounts are reallocated to people who stay with the company.
My money – A distribution is receiving a portion of the value of your ESOP account. A distribution occurs if you retire at age 65 or leave the company for some other reason (quit, death, disability). When you turn age 65 you become eligible for your first distribution in approximately 1 year.If you quit you must wait at least 5 years, before you are eligible for your first distribution, unless you turn 65. Distributions take place over a period of five years in 20% increments of your total account value. In case of death, your beneficiary will receive the rights of any unpaid account balance. When you become eligible for a distribution, you’ll have the option to rollover your eligible ESOP cash into an approved IR S Plan (401k, IRA) or you may elect to take cash. If you are less than age 59 ½ significant taxes and penalties apply if you elect cash.
Diversification (A form of Distribution) Diversification is taking a qualified portion of your account and investing in other retirement vehicles 401k, IRA, etc. Diversification applies to participants who have been in plan for 10 years & are at least 55 years old. D iversification period lasts six years from the time participant turns 55. Participant’s have a five year window to diversify 25% of their total shares after they turn 55. Participant?s can elect to diversify 50 % of their total shares, minus the number of shares previously diversified, in the sixth year.
If you have any questions on whether you are a participant in the ESOP, or have other ESOP questions please contact Irene Pluhar or Jacie Smith in the Payroll Department or Shawn Coffin, Human Resources, for more information.