'When workers cash out': FASB panel launches review of ESOP buyback warnings

When uncertainty hits, employees don't always sit tight. They cash out.

People wanting their money when headlines turn ugly is one factor behind a key accounting advisory group's decision to launch a closer look at Employee Stock Ownership Plan (ESOP) buybacks, after lenders and surety firms pressed for clearer, more consistent disclosure of repurchase obligations.

At a March 3, 2026 meeting, the Financial Accounting Standards Board's Private Company Council (PCC) agreed to put ESOP repurchase obligations on a research track and to schedule an ESOP 101 education session, after hearing that existing disclosures don't always give a clear, consistent picture of how big the buyback demand could become or when it could hit.

"It really plays a lot of human emotion," said Robert Messer, a partner at BR Messer and a former bank CFO and chief risk officer. "Most human beings do not call in good times," he told the council. "They call at times of uncertainty…or when there's fear going on."

In practical terms, Messer said, that means ESOP buybacks can spike when a company is already under stress, not when business is booming.

The basic ESOP issue: When workers cash out

In many employee stock ownership plans (ESOPs), workers in private companies get company stock that isn't easily sold on an open market. So, employers are required to give participants a "put option", the right to require the company to buy back those shares at fair value.

That buyback promise is called a repurchase obligation, and it can become a major call on cash if a large group of employees retire or leave around the same time.

FASB staff said the issue has come up repeatedly from users of private-company financial statements in recent months. But there was a twist: when FASB asked a broader group what issues should be prioritized, most respondents rated ESOP repurchase obligation disclosures as a low priority, even as lenders, sureties and construction-focused practitioners kept calling it a top concern.

What the rules say now and what lenders are still not seeing

Under current U.S. GAAP, an ESOP sponsor must disclose the existence and nature of any repurchase obligation, including the fair value of shares allocated to participants that are subject to repurchase as of the balance-sheet date. Private-company ESOP sponsors generally do not have to record the repurchase obligation as a liability on the balance sheet.