Introduction
Dividing retirement assets can be one of the most technical and sensitive aspects of a divorce. If you’re dealing with an interest in the Thompson & Litton, Inc.. Employee Stock Ownership Plan and Trust, you’re not just talking about a typical 401(k) or pension—this is an employee stock ownership plan (ESOP), which comes with its own rules, challenges, and deadlines. Understanding how to divide this specific plan properly through a Qualified Domestic Relations Order (QDRO) is essential. And that’s exactly what we’ll walk you through.
Understanding QDRO Basics
A QDRO is a court order that splits retirement assets between divorcing spouses. It’s required if a former spouse (commonly called the “alternate payee”) is going to receive part of the plan participant’s retirement benefits. Without a QDRO, plan administrators can’t legally divide the retirement account, even if a divorce decree says otherwise.
When dealing with an ESOP like the Thompson & Litton, Inc.. Employee Stock Ownership Plan and Trust, drafting the QDRO correctly requires paying special attention to provisions related to stock ownership, valuation, and payment rules that are unique to this kind of plan.
Plan-Specific Details for the Thompson & Litton, Inc.. Employee Stock Ownership Plan and Trust
- Plan Name: Thompson & Litton, Inc.. Employee Stock Ownership Plan and Trust
- Sponsor: Thompson & litton, Inc.. employee stock ownership plan and trust
- Address: 103 EAST MAIN STREET
- Industry: General Business
- Organization Type: Corporation
- Status: Active
- Plan Number: Unknown (required for QDRO submission)
- EIN: Unknown (required for QDRO submission)
- Participants: Unknown
- Asset Value: Unknown
- Plan Year: Unknown to Unknown
- Effective Date: Unknown
You or your attorney will need to obtain the plan’s summary plan description (SPD) and confirm the plan number and EIN before submitting a QDRO. These details are typically provided directly by the plan administrator.
Special Considerations When Dividing an ESOP
Not all retirement plans are alike. An ESOP, like the Thompson & Litton, Inc.. Employee Stock Ownership Plan and Trust, is more complicated than your typical defined contribution plan. Below are specific issues divorcing spouses must consider:
Stock Valuation Timing
Unlike a 401(k), which is tied to liquid accounts and more frequent market valuations, ESOPs rely on private stock. These shares are valued annually—and only once. That means the timing of the divorce and the date set for asset division can significantly impact the final number.
Let’s say the valuation date is December 31, and your divorce is finalized in July. Depending on the company’s stock performance, you might not know what your share is actually worth until the end of the year or beyond. Your QDRO needs to specify a valuation date—or at least clearly define how value will be calculated.
Diversification Rights
ESOP participants over age 55 with 10 or more years of service have the right to request diversification of their plan assets. This means they can trade out of company stock into other investment vehicles provided by the plan. In divorce cases, this can affect how and when the alternate payee receives their distribution, especially if they inherit a portion of stock and don’t intend to hold it long term.
Put Option Provisions
ESOPs operating in privately held companies must offer put options—this allows the holder of distributed stock to sell it back to the company at fair market value. This is crucial for an alternate payee. If the QDRO distributes actual shares of the ESOP to them, they’ll need to understand their right to sell those shares back to the company and the timeline within which that must happen.
Distribution Election Timing Constraints
Many ESOPs—including the Thompson & Litton, Inc.. Employee Stock Ownership Plan and Trust—have specific rules about when distributions can be made. These may relate not only to the participant’s separation from service, but also to when annual valuations are finalized. Some ESOPs only allow distributions once the stock has been officially valued, which could mean significant waiting periods for alternate payees who have won a portion in a divorce.
Make sure your QDRO accounts for these rules. Poorly timed requests can lead to rejections or delays in payment.
What a QDRO for This Plan Should Include
To divide the Thompson & Litton, Inc.. Employee Stock Ownership Plan and Trust through a QDRO, make sure the following are addressed within the order:
- A clear award of the alternate payee’s share—this can be a flat percentage, dollar value, or formula tied to a specific date
- The appropriate valuation date or instructions to use the ESOP’s next official valuation
- Whether the award is to be in stock, cash equivalent, or deferred distribution
- Put option handling—confirm whether the alternate payee can exercise rights or whether cash-out will be automatic
- Who bears taxes on the distribution (typically the alternate payee if paid directly)
Avoid Common QDRO Mistakes with ESOPs
Many QDROs get rejected because they’re not written with the ESOP’s specific rules in mind. Common mistakes include:
- Not clarifying the valuation date
- Requesting immediate distributions when plan rules don’t allow it
- Failing to address stock vs. cash distributions
- Ignoring put option rights
We’ve outlined QDRO resources or reach out for personalized help if you’re in one of our service states.