TRASOP Characteristics

The survey also examined TRASOP characteristics, focusing on the 144 plans of companies which have implemented a TRASOP. These plans revealed the following prevalences:

94.4% of the plans are intended to be qualified under both the Tax Reduction Act of 1975 and section 401(a) of the Internal Revenue Code.

93.1% of the plans are separate plans (not attached to an existing company plan).

Note: Several plans exclude officers, directors or
members of executive stock or incentive plans.

The reasoning behind such exclusion might
include the following:

1. The desire to increase the benefit provided eligible employees by eliminating from the allocation base the salaries of the highest paid employees.

2.

3.

The concern that including such employees might have an unfavorable appearance; or, conversely, excluding such employees might have a favorable appearance.

The exclusion might avoid the "insider" considerations that such a stock plan might present under securities law.

39.4% of the plans use some form of the maximum service requirement (up to three years) made possible by the fact that a TRASOP must provide for immediate vesting.

Compared to last year's survey, this year's results seem to indicate a trend toward those options that produce a larger benefit for the average participant-i.e., more restrictive eligibility requirements and lower covered compensation amounts.

Approximate Benefit Level Provided by TRASOP

To gain some insights into the benefit levels provided

by TRASOPS, survey participants were asked to give their best estimates of the following:

1.

The number of employees participating in the

TRASOP.

2.

The covered compensation of participating employees.

3. The amount of their company's qualifying capital
expenditures for 1977.

Based on these estimates, a benefit per thousand dollars
of compensation was computed. The following table dis-
plays the range breakdown of the benefit amounts for 100
companies which were able to provide data on this question.
Companies allocating the TRASOP contribution on an
essentially per capita basis (for example, where the
covered compensation is a relatively small amount such
as $1 to $5,000) are not included in this table.

Of the 115 plans responding to the question, seventy-two plans (62.6%) anticipated a benefit for the average

employee of less than $200 for 1977, thirty-two plans (27.8%) anticipated a benefit of from $200 to $500, and eleven plans (9.6%) anticipated a benefit of more than $500.

The Contributory TRASOP

Additional 1/2% Tax Credit Based on Employee Contributions.

Among 140 surveyed TRASOPS, 23 (16.4%) provide for the possibility of an additional 1/2% tax credit. Eight utilities presently include the matching feature. In the natural resources (fuel) industry, two plans (10%) provide for the extra credit and two others are planning to amend their plans. 21.4% (30 plans) do not presently provide for the possibility of an additional 1/2% tax credit but are waiting to see what administrative guidance the IRS may give regarding such a provision.

The principal problem appears to be determining how much individual employees will contribute while adhering to the legislative rules which stipulate that:

All participants must be allowed to contribute.

No participant may be required to contribute.

- The matching employer contribution will be allocated in an amount equal to each employee's matching contribution.

It appears that unless the TRASOP benefit is fairly substantial (as it is for certain utilities and certain companies in the natural resource (fuel) industry), many

companies have decided that the additional administrative burden outweighs the additional 1/2% tax credit. However, in last year's survey, only 2.5% of the surveyed TRASOPS provided for the additional 1/2% tax credit, compared to the current 16.4%.

Timing of Distributions

payments.

56.9% elected to make distributions only at termination of employment. 27.8% chose to make rolling seven-year 9.7% give participants the choice. 3.5% make distributions only at termination except in the case of economic hardship. 2.1% plan to make distributions seven years after the last contribution.