Have you thought about the question I posed last time? Specifically, how would you communicate the change to the rebalancing method of accounting to the long term participant with an account balance of $100,000? (Prior to rebalancing, his account breakdown was $90,000 in company stock and $10,000 in other investments, and then after rebalancing, his company stock holdings will be reduced to $70,000 and his other investment holdings will be increased to $30,000.)
Here are some possibilities:
- One possible benefit to this participant is the increased diversification of his account. As a long term participant, he may be nearing retirement and that is the time when it may be prudent to diversify his holdings.
- Another possibility is to stress that the ESOP was designed to share ownership with “all” and when all employees receive substantial stock allocations, corporate performance improves.
Have you had this situation? If so, what has worked for you and what did not work? Please share.
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