Answering Your ESOP Questions

Vesting

What does vesting mean?

Vesting is the process of qualifying for the full assets of an associate’s ESOP account. To become fully vested in the TPI Hospitality ESOP, an associate must be 21 years of age and work a minimum of 1,000 hours for five years, either consecutively or non-consecutively without a break of employment of more than five years. Participants vest 20% or 1/5th per year which you exceed both of these requirements, but once you vest, you are vested in your entire balance at the time and going forward.

When it comes to vesting, do I get credit for the years I have already worked?

All associates begin vesting on January 1, 2015. Past employment prior to January 1, 2015 is not considered when calculating an associate’s vesting period.

When am I eligible to participate in the ESOP?

TPI associates employed on January 24 (the first full pay period of the new year) are eligible to participate in the ESOP immediately; however, to receive an allocation of stock within the Plan, all associates must work a minimum of 1,000 hours in 2015, in addition to working a minimum of five qualifying years (meaning primarily 1,000 hours of service) before becoming fully vested. After five qualifying years, the associate’s ESOP balance becomes fully vested, meaning the funds in your ESOP account are provided to you if you should leave TPI Hospitality or at your retirement (at a time of your election after you reach the age of 65).

What is the minimum age and yearly service requirements to participate in the ESOP?

An associate must be 21 years of age or older and complete a minimum of 1,000 hours of service in a calendar year to be eligible for the ESOP. No vesting in the ESOP begins until you meet both of these requirements.

What happens if I work less than 1,000 hours in a year?

That year is not counted when calculating the five-year vesting requirement.

Do I have to maintain 1,000 hours every year to qualify?

To become fully vested, an associate must work at least 1,000 hours per calendar year, but those years do not have to be consecutive. If you fall below 1,000 in any particular year, you remain in the plan but that year is not considered when calculating the five-year vesting requirement.

What happens if I leave TPI Hospitality before I become fully vested (working five years of at least 1,000 hours per year)?

If you leave TPI Hospitality before you become fully vested you will receive 20% of your account balance for each year in which you worked 1,000 hours.

Do associates under 21 accrue any time for vesting?

Vesting may begin during the year the associate turns 21, assuming the associate works a minimum of 1,000 during that calendar year. For example, John Doe turns 21 on July 14th and works at least 1,000 during that calendar year. In this case, John can count this year as his first qualifying year.

What happens when an associate turns 21 in the middle of the year, can he/she count that as year number one for vesting?

Yes, that first year could qualify as the first year of vesting as long as the associate works a minimum of 1,000 during that calendar year. The determination of an associate’s age and hours of service is done as of December 31 of each year, so as long as these requirements are met by the end of each year, the associate will participate in the ESOP stock allocation that year.

Does my current tenure with TPI count for vesting in the plan?

All associates begin vesting on January 1, 2015. Past employment prior to January 1, 2015 is not considered when calculating an associate’s vesting period.

How long does a new associate have to wait to participate in the plan?

All associates employed on January 24, 2015 are eligible to participate immediately, but an associate only receives share allocations and becomes fully vested by being at least 21 years old and working a minimum of 1,000 hours per calendar year for a total of five years. Those five years of meeting or exceeding the 1,000 hour requirement, do not have to be consecutive.

When will I receive official documents indicating my participation in the ESOP?
All participants will receive official documents, such as beneficiary forms for the ESOP, shortly after completing their first full qualified year of vesting.

Financial

How do you determine what the value of my shares will be each year?

An independent third party hired by the Trustee will perform a thorough valuation of TPI Hospitality each year. A calculation of TPI Hospitality’s growth and your gross income will determine the value of your ESOP shares, and this will be shared with you in the spring of each year.

Are bonuses included as income when calculating my ESOP shares at the end of the year?

Bonuses are not considered part of an associate’s annual income.

How much do I have to contribute to be part of the plan?

You are not required to contribute anything financially to participate in the ESOP. Your contribution is made by providing an outrageous guest experience, which allows the company to grow and enhances your share of the company.

Is the allocation of shares based on gross or net wages?

All allocations are calculated on an associate’s gross wages, which includes claimed tips and excludes bonus for salaried managers.

How do I know the value of my account balance?

Each year after the valuation process is completed each participant receives an individualized ESOP account balance statement. This statement includes detailed information such as the participant’s vesting percentage and their account balance. This balance remains unchanged until a new valuation is completed the following year.

Will I receive financial information on TPI Hospitalit<br /> y’s financial performance?

Sensitive financial information cannot be widely shared, but TPI Hospitality is committed to keeping all associates abreast of the company’s current financial status and future vision. We anticipate reporting how the company is doing on a quarterly basis.

Are any dividends paid out to me from my shares?

The structure of the TPI Hospitality ESOP does not provide for the payment of dividends. All excess funds are redirected back into the company to provide additional growth.

Do I have to pay income tax on my shares?

You do not pay any income tax on the shares as you accumulate them over time. You will only pay tax on the shares at the time they are paid out to you. To avoid paying tax, you also have the option of rolling your funds into a different qualifying retirement account if you should leave TPI Hospitality or retire.

Am I personally liable for the company’s debts?

No, your personal property is not at risk. Like regular stockholders, ESOP participants are not personally liable for the debts of the corporation.

Can I borrow against my account balance?

The structure of the ESOP does not provide an opportunity to borrow against the account balance.

Are a server’s tips included as income when calculating my ESOP shares at the end of the year?

All reported tips are considered part of an associate’s annual income.

Can I buy extra shares voluntarily?

The structure of the ESOP does not allow associates to purchase additional shares voluntarily.

How is the ESOP funded?

As TPI Hospitality grows the additional value of the company benefits the ESOP accounts for all associates because the shares within each participant’s account will grow in value.

Will TPI Hospitality continue to offer a 401-K plan?

TPI Hospitality’s current 401-K plan will remain in place unchanged.

Will you be giving extra shares as a bonus?

The structure of the ESOP does not allow extra shares to be distributed as a bonus.

Can I roll my payout into another retirement account?

If you should leave TPI Hospitality, you can roll the funds in your ESOP account into another qualifying retirement account of your choice.

If I leave TPI Hospitality or retire at age 65, how do I receive my funds?

If you leave TPI Hospitality or retire at age 65 after working five qualifying years, the funds in your ESOP account will be paid out over a five-year period, with 20% of your account being paid out each year. That said, there is an exception for small balances (generally those less than a few thousand dollars) that will be paid out in one lump sum payment.

ESOP

How were the rules and requirements of TPI’s ESOP decided?

The structure of an ESOP is determined by Federal law.  TPI has worked diligently to make sure that all Federal requirements are met.

What is an ESOP?

ESOP stands for an Employee Stock Ownership Plan (similar to a 401(k) plan, it is a retirement governed by federal law), which allows each employee to own a beneficial interest in TPI Hospitality, and grow their retirement savings over time.

How does TPI Hospitality benefit from becoming an ESOP?

An ESOP is a way to create a win-win solution to reward associates for helping build TPI into a world class company and to assist Tom in beginning his transition out of TPI’s ownership in an efficient manner. Ultimately, being an ESOP allows TPI Hospitality greater efficiencies to promote ongoing future growth. Some specific benefits of a typical ESOP are:

Associates become more motivated, resulting in higher productivity and better decision making.
Associates have another reason, a solid financial reason, to stay committed to TPI during their career.
Your ESOP will not pay state and federal income taxes, just like a 401K Plan. This allows TPI to fund your ESOP retirement account.

The ESOP puts in place a succession plan in regard to future leadership of TPI which allows it to continue to exist and grow and thrive into perpetuity.
The ESOP provides pride in knowing you are an owner.

How is the ESOP funded?

As TPI Hospitality grows the additional value of the company benefits the ESOP accounts for all associates because the shares within each participant’s account will grow in value.

Why do I want to participate in an ESOP?

Assuming you meet the qualification criteria, participation in an ESOP is automatically provided at no cost to you, yet over multiple years can prove to be a valuable retirement funding benefit.

What is the minimum age and yearly service requirements to participate in the ESOP?

An associate must be 21 years of age or older and complete a minimum of 1,000 hours of service in a calendar year to be eligible for the ESOP. No vesting in the ESOP begins until you meet both of these requirements.

As a member of the ESOP, will I have any voting privileges?

TPI Hospitality’s current leadership, in conjunction with the newly appointed trustee, will make key decisions. Feedback from TPI Hospitality associates is always encouraged through any of the available communication tools.

What happens if I leave TPI and come back years later?

If you leave TPI hospitality and return years later (more than five after you initially left) you would again need to work five qualifying years (as defined above) to again become fully vested in the ESOP.

How does an ESOP change my work experience?

TPI Hospitality’s culture has always demanded that associates come to work and execute their duties to the best of their ability because that was the best way to ensure company success and provide job security. Now, these demands still apply, but you have two new important reasons to do your best: it’s your responsibility as an owner, and you will get a piece of the wealth you help create.

Who has the authority to sell the company after Tom Torgerson is gone?

The TPI Hospitality ESOP has been carefully designed so that TPI Hospitality can potentially live on forever. A third-party trustee, chosen by TPI Hospitality, assures that all decisions made are in the best interest of TPI owners (the associates). Ultimately, the Board of Directors and the ESOP trustee will make the final determination whether to accept a proposed purchase offer. This scenario is highly unlikely and would only occur if the Trusteed deemed it to be in the best interest of TPI’s associates.

Is there any way to learn more about the workings of an ESOP?

For any additional questions about TPI Hospitality’s ESOP, please ask your on property ESOP Representative or s
ubmit a question here (which is linked to a form to submit a question/form on the home page).  If you want to learn more about ESOPs in general, The National Center for Employee Ownership (link to www.nceo.org) is a nonprofit organization that provides information and research on ESOPs, their site has the latest news and information on employee ownership.

When will I receive official documents indicating my participation in the ESOP?
All participants will receive official documents, such as beneficiary forms for the ESOP, shortly after completing their first full qualified year of vesting.

Retirement

Can my shares stay in the ESOP after I retire so they can continue to grow?

Upon retiring from TPI Hospitality, an associate will be paid out over a five-year period at a rate of 20% each year, unless your account balance is less than a few thousand dollars.

How will this plan affect my future social security?

The TPI Hospitality ESOP benefits will not affect your future social security benefits, and the payout funds are not considered wages for meeting social security testing.

Am I required to cash in my shares at age 65, or can I keep working?

Associates are welcome to continue working after age 65. The retirement payout will begin when you stop working after you turn 65.

How will my shares be distributed when I retire?

An associate will be paid 1/5th of your retirement funds on each of the five years following retirement. The value of your 1/5th for each of the five year payouts is calculated based on the most current year’s value. Therefore, your shares will continue to grow each year over this five year period before you are fully paid out.

What happens when an associate turns 65?

You will have the ability to access your ESOP retirement funds at that time. You may also opt to continue working as well and either receive a payout from the ESOP or not, at your option.

If I leave TPI Hospitality or retire at age 65, how do I receive my funds?

If you leave TPI Hospitality or retire at age 65 after working five qualifying years, the funds in your ESOP account will be paid out over a five-year period, with 20% of your account being paid out each year. That said, there is an exception for small balances (generally those less than a few thousand dollars) that will be paid out in one lump sum payment.

Can I roll my payout into another retirement account?

If you should leave TPI Hospitality, you can roll the funds in your ESOP account into another qualifying retirement account of your choice.

Will TPI Hospitality continue to offer a 401-K plan?

TPI Hospitality’s current 401-K plan will remain in place unchanged.

How does this affect me if I am 66 years old right now?

You are treated the same as any other associate and have the ability to vest in the ESOP over the course of the next five years.

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Mitch Peterson, Chief Operations Officer, TPI Hospitality