Over the years, Publix Associates have shared with us some things they believed to be true but were in fact not true at all. Here are a few we encounter most often along with the reality.
I can leave my ESOP at Publix indefinitely.
If you separate from service under the age of 62, you are allowed to leave your ESOP with Publix until you reach age 62. However, in the January after you turn 62 years old, Publix will send you distribution paperwork and you are required to take full distribution within 30 days.
When I take my distribution, half of it will go to the IRS.
Most likely not, but it depends on your age when you separate from service. If you’ve separated from the company, you may be able to take advantage of the “net unrealized appreciation” (NUA) rules associated with the distribution of company stock from a qualified plan that — if applicable — could substantially reduce your potential tax liability.*
If I’m below age 59½, I will have to pay a 10 percent tax penalty on my distribution to the IRS.
Again, it depends. If you remain employed with Publix until age 55, you may be able to access your ESOP and 401(k) at your separation without incurring the 10 percent penalty.
Also, beginning at age 55, if you have 10 years of service, Publix will allow you to begin taking distributions while you’re still employed through a process called “The Diversification Election,” however, if you’re below age 59½, distributions using this option ARE subject to a 10 percent penalty in addition to regular taxation as income if the proceeds aren’t rolled into an IRA within 60 days (see the Diversifying BEFORE You Retire section for more details on The Diversification Election).
Even if you are below 59½, there is strategy known as a 72(t) arrangement that enables you to receive a steady stream of income from the proceeds of your qualified plans without incurring the 10 percent penalty.* (The 72(t) is also known as a Substantially Equal Periodic Payment arrangement or SEPP).
When I need to access my ESOP, I can take is out as I need it.
If you need a dime, you’ve got to take the whole thing. Other than the “diversification election” previously mentioned, if you need some or all of your ESOP for any reason after separating from the company, you have to take the entire amount.
You can take the proceeds as a stock certificate or cash, or a combination of the two, but you must decide at the time you request distribution. Once you execute your distribution, your decision cannot be reversed and may trigger a “tax event” depending on what you do with the proceeds.
When I take the proceeds, I have to sell the stock back to the company
As it stands right now, Publix will not force you to sell your stock! You can keep it indefinitely and even pass it on to your heirs.