Question

Sydney has worked for WillCo for the last 20 years. She just had her 60th birthday and is thinking about retirement. WillCo sponsors an ESOP in which Sydney is a participant and has been since the plan’s inception 18 years ago. WillCo stock has increased significantly and Sydney is considering diversifying her WillCo stock in the ESOP. Which of following statements is correct?

a. Sydney cannot diversify until three years prior to retirement.

b. Sydney can diversify all of her WillCo stock because she has more than three years of service.

c. Sydney can diversify 50% of her WillCo stock.

d. Sydney can diversify 25% of her WillCo stock.

Answer 1

The correct answer is option c. Sydney can diversify 50% of her WillCo stock.

Sl. No.	ESOP Diversification Criteria	Did Sydney meet
1.	Participating employee should have attained the age of 55 years	Yes, Sydney is a participating employee and she has attained more than 55 years of age
2.	Participating Employee should have participated in the plan for ten years	Yes, Sydney is a participant and has been since the plan’s inception 18 years ago
3	during the next five years (i.e. up to age of 55 + 5 = 60 years) to diversify up to a total of 25% of company stock	Sydney just celebrated her 60th birthday, she has just crossed this threshold, she is in the sixth year
4.	during the sixth year, the participating employee may diversify up to a total of 50%, minus any previously diversified shares	Yes, Sydney is in the sixth year, and hence this applies

Hence, the correct answer is option c. Sydney can diversify 50% of her WillCo stock.