The ESOP Repurchase Question Your Clients’ Trustees Need to Hear
How ESOP advisors, CPAs, and attorneys can add value by surfacing the funded obligation gap.
If you advise ESOP companies — as a CPA, attorney, TPA, or trustee advisor — there’s a question that separates routine compliance work from high-value strategic advice: “Is the repurchase obligation funded?”
Most ESOP companies can tell you their current share price. Few can tell you their projected repurchase obligation over the next ten years — and even fewer have a funded strategy to meet it.
Why This Matters for Your Practice
The repurchase obligation is a fiduciary issue. If the company cannot meet its obligation to repurchase shares from departing participants, the trustee is exposed and the participants are harmed. As the advisor to an ESOP company, surfacing this risk — before it becomes a crisis — is one of the highest-value conversations you can have.
It’s also a relationship-deepening opportunity. The advisor who identifies the repurchase risk and helps the board address it moves from “service provider” to “strategic partner.”
The Diagnostic Questions to Ask
Question 1: "Has the company completed a repurchase liability study in the last 24 months?" If no, recommend one immediately. This is the foundation of any funding strategy.
Question 2: "What is the projected peak annual repurchase demand, and when does it hit?" If the answer is vague, the board is not adequately informed.
Question 3: "Is the repurchase obligation funded by a dedicated strategy, or is the company relying on future cash flow?" ‘Cash flow’ is not a strategy. It’s a hope.
Question 4: "What happens if the highest-balance participant dies unexpectedly?" If there’s no COLI in place, a single death can create a multimillion-dollar cash demand with no funded source.
Where SSG Fits
SSG Financial Group designs insurance-based repurchase liability funding strategies — COLI portfolios calibrated to the company’s specific participant demographics, account balance concentration, and repurchase projections. We work alongside the ESOP trustee, TPA, and legal counsel as the insurance and financial planning specialist.
If you have ESOP clients who haven’t addressed repurchase funding, schedule a 20-minute conversation to explore how we can support your advisory team.
Partner With SSG Financial Group
We work alongside CPAs, attorneys, and financial advisors as the insurance and financial planning integrator on their clients’ advisory teams. Schedule a 20-minute conversation to discuss how we can support your clients.
Schedule a 20-Minute Conversation
Learn more at www.ssgfingrp.com
About SSG Financial Group
SSG Financial Group provides integrated insurance and financial planning solutions, working alongside advisory teams to serve business owners, ESOP companies, and high-net-worth families. We don’t replace any member of the advisory team — we fill the gap that exists when insurance and financial planning aren’t coordinated with the legal and tax work.
