Repurchase Obligation Liability – Forecasting and managing repurchase liability obligations

A repurchase obligation study estimates the amount of money an ESOP company will need in the future to buy back stock from employees who want to sell their shares. This study helps the company understand their future financial responsibilities and plan accordingly.

As a best practice, companies considering an ESOP should conduct a repurchase obligation analysis as part of the plan design process. It is also recommended to update the study every 2-4 years to stay informed of any changes.

The repurchase obligation is a future liability for the company that sponsors the ESOP. It is important to understand this obligation and its potential impact on the business by regularly monitoring it. Various events such as retirement, death, diversification, disability, and terminations creates an event where the company to buy back stock.

If you're interested in learning more about repurchase obligation studies, feel free to contact us. We are happy to educate and share our experience with previous customers. Education is key when it comes to understanding ESOP repurchase obligations.