ESOP Rollover Decision Checklist

1. Confirm your vesting

The number on your statement may not be the number that leaves with you. Only vested dollars are yours.

• I have my most recent ESOP account statement.
• I know whether my plan uses 3-year cliff or 6-year graded vesting.
• I know my years of service and my current vested percentage.
• I have calculated my vested account balance in dollars.

2. Confirm distribution timing

ESOPs can defer the start of your payout for years. Know the timeline before you plan around the money.

• I have asked the plan administrator for my distribution start date.
• I know whether the plan pays in a lump sum or installments.
• If my balance is large, I know whether the extended payout period applies.
• If my balance is under the mandatory cash-out threshold, I have decided where I want the funds sent.

3. Check your special rights

Some readers can exercise rights at separation that don't apply to most retirement plans.

• I am 55 or older with 10 or more years of plan participation, and I have asked about diversification rights.
• If my shares are in a closely-held company, I understand the put-option terms.
• I have asked whether the Net Unrealized Appreciation (NUA) tax election applies to my situation.

4. Pick the destination account

Where the money goes determines how it is taxed and what you can hold inside it.

• I have decided between a traditional IRA, Roth IRA, or solo 401(k).
• I know whether I want a brokerage IRA (stocks and funds only) or a self-directed IRA (alternative assets too).
• If converting to Roth, I have estimated the tax bill for this calendar year.

5. Move the money safely

This is where the most expensive mistakes happen.

• I am requesting a direct trustee-to-trustee transfer, not an indirect rollover.
• If indirect, I understand the 20% mandatory withholding and the 60-day window.
• I have opened the receiving account before requesting the distribution.
• The receiving custodian's name, address, and account number are confirmed and ready to send to my ESOP plan administrator.

6. Keep good records

• I have saved every form sent to or received from the plan administrator.
• I have flagged the upcoming Form 1099-R from the ESOP plan to expect at year-end.
• I have a tax professional or CPA who knows about this rollover.