Headlines about "ESOPs"
Gathered from the web by the editors at BenefitsLink.com.
Employee Ownership Update for July 1, 2009
NCEO Executive Director Corey Rosen, in his first column on the newly revised NCEO Web site, reports on what's new in the employee ownership world: SAIC changed its stock structure to eliminate the 10-to-1 voting rights that preferred shares held by employees were given when the company went public, the SEC issued a rule allowing employees with vested stock options to use them as collateral to purchase call options, and the NCEO is soliciting material for a book on what not to do with an ESOP. (National Center for Employee Ownership)
Worker-Owners Sue Top Leaders at the Antioch Co.
Excerpt: "Current and former employees who lost millions when scrapbooking pioneer Creative Memories filed for bankruptcy protection are suing leaders of their former employer and its parent company. The current and former employees contend that when St. Cloud-based Creative Memories and its parent The Antioch Co. decided to become 100 percent employee-owned, its top leaders and other representatives did so with conflicts of interest and wanted only to avoid taxes and retain personal profit and control. These decisions, along with financial incentives for employees to cash in their stock, eventually led Antioch and Creative Memories to file Chapter 11 bankruptcy in November. The current and former workers' retirement accounts became worthless as a result, they claim in two recently filed lawsuits. Although each lawsuit makes similar accusations, plaintiffs in the two cases argue different points and seek different outcomes." (St. Cloud Times)
[Guidance Overview] ESOP Plan Sponsor Held Liable for Issuance of 10-Year Note to Satisfy Repurchase Obligation (PDF)
3 pages. Excerpt: "In a case recently decided by a federal district court in Indiana, Craig v. Smith, 2009 WL 438635 (S.D. Ind. Feb. 20, 2009), Ontario Corporation was held to have violated ERISA by issuing a 10-year promissory note in payment for shares that had been credited to the account of a former employee, Charles A. Craig, under the company's employee stock ownership plan (ESOP), as it violated the requirement that the term of any note issued in satisfaction of a terminated ESOP participant's put right could not exceed five years." (Morgan, Lewis & Bockius LLP)
[Guidance Overview] Federal Court Denies ESOP Participant Claims for Breach of Fiduciary Duty (PDF)
3 pages. Excerpt: "In Blankenship v. Chamberlain, 2009 WL 1421201 (E.D. Mo. May 20, 2009), the court considered a complaint with five counts, including two claims for breach of fiduciary duty under ERISA (one for injunctive relief and one for monetary relief), a common law claim for breach of fiduciary duty, a claim under Missouri state law to remove the defendant as an officer of the company and a trustee of the ESOP, and a claim for an accounting." (Morgan, Lewis & Bockius LLP)
Safe Harbor 401(k) Contributions Made to an ESOP: More Details
In the second installment of her column on the National Center for Employee Ownership's Web site, Nancy Dittmer returns to the topic of safe-harbor 401(k) contributions made to an ESOP. (National Center for Employee Ownership)
Owning Too Much Company Stock Puts Workers' Retirement at Risk, According to Study
Excerpt: "Congress should ban employer stock from company-sponsored retirement plans to spare workers the risk of putting too much of their nest eggs in one basket, a new study by a University of Illinois legal expert says. Sean Anderson says employee stock ownership plans, or ESOPs, are the biggest threat, with even heavier investment in company stock than the 401(k) plan that gobbled up workers' savings when energy giant Enron Corp. collapsed amid scandal in 2001. Workers whose employers have ESOPs also typically have no choice about whether to invest in company stock, said Anderson, who wrote an article that will appear in the Loyola University Chicago Law Journal." (Agency Science)
Safe Harbor 401(k) Contributions Made to an ESOP
The first installment of a new online column by Nancy Dittmer at the NCEO Web site. (National Center for Employee Ownership)
[Guidance Overview] Letter Ruling Illustrates Need for Care to Preserve Beneficial Taxation of ESOP Stock Distributions
Excerpt: "It is not necessary to physically distribute a stock certificate to the former employee, if he immediately sells the stock back to the employer. However, it is crucial that the ESOP, the distribution documents and the operating procedures clearly provide that the employee is receiving stock from the ESOP and is immediately selling the stock to the employer. The ruling DOES NOT consider the situation where the ESOP itself purchases the stock from the terminated employee, instead of a purchase by the employer." (Warner Norcross & Judd LLP)
Twelve Bogus Reasons Not to Do an ESOP (and Seven Good Ones)
NCEO Executive Director Corey Rosen discusses valid and invalid reasons why not to implement an employee stock ownership plan (ESOP). (National Center for Employee Ownership)
Employee Ownership Update for May 29, 2009
NCEO Executive Director Corey Rosen discusses the NCEO's 2009 Employee Ownership 100 list; the Australian government's withdrawal of a proposal to tax equity awards at the time of grant for higher-income taxpayers; German unions pressing for an equity stake in companies where they are taking concessions; and a new LinkedIn group from the NCEO. (National Center for Employee Ownership)
[Guidance Overview] Circuits Split on Deductibility of Proceeds from Stock Redemption Used to Satisfy ESOP Distribution Obligations
Excerpt: "An Internal Revenue Service (IRS) official recently commented at an American Law Institute-American Bar Association conference that the IRS will continue to litigate the issue of whether a corporation is entitled to a deduction under Section 404(k)(1) of the Internal Revenue Code (the Code) for payments used to redeem its stock to satisfy the distribution obligations under its employee stock ownership plan (ESOP). . . . This comment appears to be in response to the Eighth Circuit's decision on this issue in General Mills v. United States, 554 F.3d 727 (8th Cir. 2009), which although favorable to the IRS, is contrary to the decision reached by the Ninth Circuit in Boise Cascade v. United States, 329 F.3d 751 (9th Cir. 2003)." (Morgan, Lewis & Bockius LLP)
Updated Employee Ownership 100 list: America's largest ESOP and other employee-owned companies
The NCEO has published on its Web site the newest version of its Employee Ownership 100 list, which lists the largest U.S. companies with least 50% of their stock owned by an ESOP, a stock purchase plan in which most full-time employees can participate, a profit sharing plan or other trust, or some combination of such plans. (National Center for Employee Ownership)
Employee Ownership Update for May 15, 2009
NCEO Executive Director Corey Rosen discusses the impressive 2003-2008 stock price growth of ESOP companies in a recent NCEO survey of executive compensation; stories that your customers tell about you, illustrated by an anecdote from Southwest Airlines President Emeritus Colleen Barrett; a new paper saying that the stock options backdating scandal caused significant shareholder damage; and the Ownership Thinking conference. (National Center for Employee Ownership)
[Guidance Overview] Problems to Avoid in ESOP Distributions
Excerpt: "The adverse impact of ESOP distribution provisions on company profits must be balanced with the company's desire to provide meaningful benefits to plan participants. In most cases, ESOP plan design starts with the assumption that distributions should resemble the form and timing for distributions from profit sharing plans or other plans sponsored by the employer. It is not unusual to find ESOPs drafted to provide distributions commencing in the year after separation from service and including single sum distributions. Often single sum distributions are called for in the document to allow distributees to take advantage of capital gain treatment for the appreciation in the stock's value - a sound, but often impractical planning point." (Chang Ruthenberg & Long PC)
At Chrysler and GM, It's Not Employee Ownership
As part of their efforts to recover, General Motors and Chrysler are pursuing agreements with the UAW to provide the union with company stock to help fund retiree health-care trusts. NCEO Executive Director Corey Rosen explains that although many articles in the press say that employees will now be owners of General Motors and Chrysler through this plan, what is being proposed is not really employee ownership in any meaningful sense. (National Center for Employee Ownership)
[Guidance Overview] Indemnification Provisions: Do They Apply to Excuse a Party's Own Wrongdoing?
Excerpt: "A novel indemnification issue arose in the context of the complex ERISA litigation before U.S. District Court Judge Melinda Harmon in the Texas Southern District. Can a party invoke an indemnification provision in an administrative services agreement as a defense to its own negligence? The facts are quite complex, but unnecessary for comprehending the essential issue at stake here. The litigation is not about the Enron class action settlement, but about mistakes in calculation of entitlement to the settlement funds. In short, the critical issue is responsibility for losses and expenses resulting from Hewitt's mistaken calculations for distribution of the first tranche of the settlement funds, as well as for defense of claims brought against Hewitt by Enron Corp. Savings Plan and the Administrative Committee of the Enron Savings Plan." (Roy Harmon III via Health Plan Law)
Judge Dismisses Most Claims in U.S. Sugar Suit
Excerpt: "A federal court judge has pulled the plug on 12 of 13 counts that were part of a class action lawsuit filed by shareholders of Clewiston-based U.S. Sugar Corp. The suit, filed in January 2008 in West Palm Beach, alleged that some of the company's top executives attempted to deprive shareholders of a chance to sell their stock on two occasions when U.S. Sugar received buyout offers. The 13-count complaint alleged breach of fiduciary duty and violation of Employee Retirement Income Security Act (ERISA) statutes." (South Florida Business Journal via bizjournals.com; free registration required)
Judge Dismisses Most Claims in U.S. Sugar Suit
Excerpt: "A federal court judge has pulled the plug on 12 of 13 counts that were part of a class action lawsuit filed by shareholders of Clewiston-based U.S. Sugar Corp. The suit, filed in January 2008 in West Palm Beach, alleged that some of the company's top executives attempted to deprive shareholders of a chance to sell their stock on two occasions when U.S. Sugar received buyout offers. The 13-count complaint alleged breach of fiduciary duty and violation of Employee Retirement Income Security Act (ERISA) statutes." (South Florida Business Journal via bizjournals.com; free registration required)
[Guidance Overview] New IRS Ruling Regarding Taxation of ESOP Distributions (PDF)
4 pages. Excerpt: "The national office of the Internal Revenue Service (IRS) has issued a new Technical Advice Memorandum (TAM) regarding distributions from an Employee Stock Ownership Plan (ESOP) to terminated plan participants. TAM 200841042. This TAM is important for all ESOP companies that allow or require terminated participants who receive distributions of company stock to sell that stock back to the company. The issue presented in the TAM related to a recent case involving the proper tax treatment of distributions of employer stock to a group of terminated employees who elected to sell the shares allocated to their accounts back to the company immediately upon distribution of their benefits." (Morgan, Lewis & Bockius LLP)
Employee Ownership Update for April 15, 2009
NCEO Executive Director Corey Rosen discusses the results of the NCEO's survey of executive compensation in ESOP companies; the content of the NCEO's new issue brief on equity compensation in a down market; and the Great Game of Business's conference. (National Center for Employee Ownership)
DOL Subpoenas Tribune on ESOP
Excerpt: "The U.S. Department of Labor has subpoenaed Tribune Co. in an investigation connected to the media company's employee stock-ownership plan (ESOP). Citing a bankruptcy court filing, the WSJ notes that Labor Dept. is examining aspects of the ESOP under provisions in the federal Employee Retirement Income Security Act, which requires proper disclosure of funding details and risks related to workers' retirement plans. 'We view this as a routine inquiry and we are responding by producing the requested documents concerning the ESOP,' Tribune said in a statement." (PLANSPONSOR.com; free registration required)
Tribune Co. Subpoenaed Over Employee Stock Plan
Excerpt: "The Labor Department subpoenaed the Tribune Company over its employee stock plan, which was crucial to the purchase of the company by the billionaire Sam Zell . . . . The company disclosed the subpoena, issued in March, in a bankruptcy court filing and said it had handed over the documents." (Reuters via The New York Times; free registration required)
New edition of The ESOP Communications Sourcebook
The NCEO provides excerpts from the new edition of its book The ESOP Communications Sourcebook, which provides articles on communicating the plan to employees; sample communication documents; case studies; samples of what successful companies are doing; PowerPoint presentations and recorded Webinars to use; and more. The new edition includes much more electronic resources on its accompanying CD, plus new articles on communicating in a downturn and on what must be communicated. (National Center for Employee Ownership)
Employee Ownership Update for April 1, 2009
NCEO Executive Director Corey Rosen discusses FASB's reconsideration of whether ESOP-held shares that are mandatorily redeemable upon the occurrence of an event certain to occur are liabilities; French executives who gave up stock options; cash incentives; and, as an April 1 special, a new system that attaches to the ear and detects brain wave patterns in executives in response to various pay systems. (National Center for Employee Ownership)
[Guidance Overview] Managing an ESOP Company in Challenging Economic Times: Steps to Avoid Litigation & How to Proceed if Avoidance Fails Webcast (PDF)
The 24 page presentation covers the Legal Environment, Types of Claims, Best Practices to Avoid Litigation/Defend Claims, and When a Lawsuit is Filed. (Morgan, Lewis & Bockius LLP)
ESOP Restatements and Submissions Present Opportunities
Excerpt: "[A]ll companies sponsoring ESOPs should be aware that their plan documents must be restated and submitted to the IRS every five years for a letter of determination of their tax qualified status. What they may not realize is that the ESOP restatement process offers potentially unrealized opportunities for cost efficiency, employer protection and creative re-design." (Chang Ruthenberg & Long)
Employee Ownership Update for March 13, 2009
NCEO Executive Director Corey Rosen discusses a new survey of what companies plan to do with equity compensation; how ESOPs are still a good idea for employee retirement security; a newly endowed chair for employee ownership that has been established at Rutgers; and applying for the Principal 10 Best Companies for Financial Security award. (National Center for Employee Ownership)
ESOP a Great Incentive for Employees
Excerpt: "What is an ESOP? . . . . The acronym stands for Employee Stock Ownership Plan. But, during this financial downturn, you might want to think of it as an Economic Stimulus Offering Possibility -- the possibility to inspire employee loyalty and provide liquidity for your company (or you), all while enjoying significant tax breaks." (The Atlanta Journal-Constitution)
Issue Brief: The State of Employee Ownership 2009
The NCEO presents excerpts from The State of Employee Ownership 2009, an issue brief that reviews the number of plans, participants, and assets for ESOPs and similar plans, broad-based stock options, 401(k) plans with company stock, and employee stock purchase plans. It also reviews the most relevant research on employee ownership and corporate performance and recent political and legal developments in the field. (National Center for Employee Ownership)
Employee Ownership Update for Feburary 27, 2009
NCEO Executive Director Corey Rosen discusses new estimates of the number of ESOP plans and participants; an employee-owned company that is a poster company for the stimulus bill; provisions in the stimulus bill that may help ESOP companies; and an award from the Center for Business Education at the Aspen Institute to be given for a dissertation on shared capitalism through employee ownership. (National Center for Employee Ownership)
A Statistical Profile of Employee Ownership
The NCEO has released the 2009 update of its Statistical Profile of Employee Ownership. The Web page with the data also explains the methodology behind the new estimates of the number of ESOPs. (National Center for Employee Ownership)
A Statistical Profile of Employee Ownership
The NCEO has released the 2009 update of its Statistical Profile of Employee Ownership. The Web page with the data also explains the methodology behind the new estimates of the number of ESOPs. (National Center for Employee Ownership)
[Guidance Overview] Corporation Not Entitled to 404(k) Deduction for Redemption of Stock Used to Satisfy ESOP Distribution Obligations
Excerpt: "A corporation was not entitled to a deduction under Code Sec. 404(k)(1) for the proceeds from a stock redemption that were used to provide for cash distributions made by an ESOP trust to terminated employees, the U.S. Court of Appeals at St. Louis (CA-8) has ruled in General Mills, Inc. & Subsidiaries v. United States." (Wolters Kluwer)
Employee Ownership Update for Feburary 17, 2009
NCEO Executive Director Corey Rosen discusses the predominance of ESOP and other employee-owned companies in Fortune magazine's 100 Best Companies to Work For in America list; Bureau of Labor Statistics data indicating that the percentage of workers receiving stock options in 2008 was unchanged from previous years; and data from Radford Surveys on equity award exchange patterns. (National Center for Employee Ownership)
Capital Loss on ESOP Stock? Maybe
Excerpt: "Q: Can I take a capital loss on my shares in an Employee Stock Ownership Plan (ESOP) if the company was bought out while under bankruptcy protection?" (USA TODAY)
Employee Ownership Update for Feburary 2, 2009
NCEO Executive Director Corey Rosen discusses a survey of how ESOP companies are weathering the downturn, Google's generous option exchange program, ESOPs and the coming wave of business sales, and initial results from the NCEO's first ESOP membership survey. (National Center for Employee Ownership)
Healthways Inc. Stock-Drop Suit Passes First Hurdle
Excerpt: "An employee 401(k) stock-drop suit survived its first major challenge when a federal judge in Tennessee turned away an early effort by the employer to have the claim dismissed. U.S. District Judge Todd J. Campbell of the U.S. District Court for the Middle District of Tennessee ruled that employee Kenneth Banks had marshaled enough evidence to back up his claims that Healthways Inc. continued having a company stock investment option even after it was no longer prudent to do so. Banks also alleged the company did not properly disclose information about its finances to participants." (planadvisor)
Partial Settlement of Employee Stock Ownership Plan Class Action Preliminarily Approved
Excerpt: "The United States District Court for the Northern District of California granted preliminary approval for a partial settlement of $40 million in a class action on behalf of participants in and beneficiaries of the Employee Stock Ownership Plan ('ESOP') of K-M Industries Holding Co., Inc. ('K-M Industries'), the parent company of Kelly-Moore Paint Co., Inc. and Capital Insurance Group. The case, Fernandez et al. v. K-M Industries Holding Co., Inc. et al., Case No. C 06-07339 (CW), is pending in U.S. district court in Oakland, CA." (Lewis, Feinberg, Lee, Renaker & Jackson, P.C.)
Employee Ownership Update for January 15, 2009
NCEO Executive Director Corey Rosen discusses an increase in stock drop cases involving 401(k) plans and ESOPs; an analysis of stock option valuation assumptions; the recoverability of equity-based compensation deferred tax assets; NCEO volunteer opportunities; and the Great Game of Business conference. (National Center for Employee Ownership)
Ford's ESOP Problems are Beginning to Look a Lot Like the Tribune Co.'s ESOP Problems
Excerpt: "Just before the end of last year, Ford Motor Company moved to dismiss a case brought by participants of Ford's employee stock ownership plan (ESOP) on the ground that participants failed to state a viable claim for relief. Participants claim that the ESOP's investments in Ford company stock were imprudent. U.S. District Judge Stephen J. Murphy favored the argument made by the ESOP participants. He noted in his opinion that 'while ERISA does provide an exemption from diversification rules for ESOPs, it does so while still requiring that the plan sponsor act with prudence when investing in company stock.'" (InjuryBoard.com)
Employee Ownership Update for January 5, 2009
NCEO Executive Director Corey Rosen discusses a wave of stock option repricings; IRS statements to ESOP advisors that they are putting on hold approving plan provisions that segregate ESOP accounts at termination until the IRS comes up with a position on this; enhanced employee ownership opportunities in Germany; an employee ownership proposal at Change.org; and an invitation to submit stories about how your employee ownership company is dealing with the downturn. (National Center for Employee Ownership)
[Guidance Overview] ESOP Planning 2008: Distributions
Excerpt: "Distribution planning is one of the most important components of the planning process. Even if you had a detailed plan in place when you established your plan, chances are that things have changed. You should perform a distribution analysis annually. Here are some things to consider . . . ." (The One-Stop ESOP Blog)
Federal Judge Allows Ford ESOP Suit to Move Forward
Excerpt: "The U.S. District Court for the Eastern District of Michigan has denied a motion to dismiss a case brought by participants of Ford Motor Co.'s employee stock ownership plans claiming the plans' investment in Ford company stock was imprudent." (planadvisor)
ESOP Planning 2008: Plan Documents and Disclosures
Excerpt: "One of your most important responsibilities is to ensure that your plan documents are updated as required by law and are consistent with the way the plan is actually being administered. Plan documents include, but are not limited to, the plan document, trust document, summary plan description (SPD), and loan documents." (The One-Stop ESOP Blog)
Employee Ownership Update for December 15, 2008
NCEO Executive Director Corey Rosen discusses the Tribune Company bankruptcy and the Tribune ESOP; employee ownership in LLCs; and applying for the Winning Workplaces awards. (National Center for Employee Ownership)
[Opinion] The Tribune Bankruptcy and Breach of Fiduciary Duty Litigation over Its ESOP
Excerpt: "[N]ot too long ago and in a very prescient move, a number of participants in the Tribune's ESOP filed a breach of fiduciary duty suit related to Sam Zell's use of the ESOP stock in the transaction by which Zell or entities he controlled acquired the Tribune; we now are learning that this apparently deeply flawed transaction . . . placed the ESOP plan participants' holdings at greater risk than the assets of others involved in funding the transaction, including Zell himself. Targeting the fiduciaries for possibly having allowed the ESOP assets to be used in a more risky way than others were willing to do with their own investments sure smells like a pretty credible theory to me." (Stephen Rosenberg of The McCormack Firm, LLC)
ESOPS Likely to Suffer First in Tribune Bankruptcy
Excerpt: "Chicago is NOT the place to be these days - especially if you are a corrupt politician or a financially-stressed newspaper. On the newspaper side of things - Elizabeth Dale (Florida) writes to tell us that the ESOP angle of the The Tribune Company bankruptcy is truly a mess. She points us to this story from the New York Times Deal Book . . . ." (Workplace Prof Blog)
Tribune Bankruptcy Filing Exposes Risks of ESOPs
Excerpt: "Retirement savings of Tribune Co. employees appear to have emerged largely unscathed after the media company's Chapter 11 bankruptcy filing Monday. But the filing highlights the risks of plans that invest employee savings into company stock. One big potential exposure came via the employee stock ownership plan, or ESOP, which the company set up in 2007. Under the ESOP, Tribune was planning to contribute shares -- worth about 5% of each employee's pay -- into employee accounts each year. The first contribution was expected to be made in the first quarter, and it isn't clear whether this will happen or whether the shares will have any value after Tribune's bankruptcy filing. At this point, the employees technically haven't lost anything in the ESOP because their balances are still zero." (The Wall Street Journal)
What Will Happen to the ESOP in the Tribune Bankruptcy?
NCEO Executive Director Corey Rosen discusses the fate of the Tribune Company's ESOP and places it in context. (National Center for Employee Ownership)
[Opinion] What Does the Economic Downturn Mean for Employee-Owned Companies?
Excerpt: "For most companies, this won't be an easy time. There will be pain. In these difficult conditions, leaders must strike the right balance between involving employees in determining how to go forward, and taking responsibility for some of the hard decisions. Where sales levels will simply no longer support the existing payroll, for example, something will have to be done. Leaders should solicit ideas and preferences from the employee-owners as to what exactly should be done to deal with that reality. People may be open to cutting salaries for all in lieu of laying off some ? or individuals may volunteer to reduce their hours to a part time role. At some employee-owned companies, young single employees have even volunteered for layoff where necessary to keep a family breadwinner on the payroll. All such creative measures should be considered. Still, there will be circumstances in which hard decisions ? even unpopular ones ? will be required. Employees may be uncomfortable with the notion of suggesting that colleagues should lose their jobs. Final decisions, therefore, must be the responsibility of management, who may sometimes best serve the company by being the 'bad guy.'" (The Beyster Institute)
New edition of An Introduction to ESOPs
The NCEO presents excerpts from the new edition of its most popular publication, An Introduction to ESOPs. This edition, the ninth, now features a chapter on valuation as well as various other changes and, for the first time, an index. (National Center for Employee Ownership)
Employee Ownership Update for December 1
NCEO Executive Director Corey Rosen discusses a new online tool for comparing the financials of closely held companies; a possible employee ownership candidate in the U.K.; the issue of falling ESOP company valuations in the economic downturn; and political prospects for employee ownership. (National Center for Employee Ownership)
Navigating Your Way Through Market Turbulance (PDF)
12 pages. Excerpt from a Principal Financial Group press release: 'As market turbulence takes its toll on everything from 401(k) account balances to pension plan funding, employers are scrambling to assess the full impact on their retirement programs. They are also worried about what actions they may need to take right now as fiduciaries. . . . A new guide from the Principal Financial Group(r) can help employers make this critical review of their retirement programs. Navigating Your Way through Market Turbulence takes an in-depth look at how the market volatility may be affecting four common retirement plan types: defined benefit, defined contribution, Employee Stock Ownership Plan and nonqualified deferred compensation. The guide offers action steps to consider for each plan type." (Principal Financial Group)
Employee Ownership Update for November 17, 2008
NCEO Executive Director Corey Rosen discusses a new study finding that ESOPs owning less than 5% of company shares have a small but positive effect on total compensation, while in companies where the ESOP owns more than 5%, total compensation is 5.2% higher; a trend to reprice stock options; a new resource for business school case studies on employee ownership; a cautionary tale of planning for the ESOP repurchase obligation; a job at the NCEO; and NCEO board nominations. (National Center for Employee Ownership)
California Firm Charged with Misusing ESOP Assets
Excerpt: "The U.S. Department of Labor has sued the board of directors of The Employee Ownership Holding Co. of Stockton, California, and Fife, Washington, for alleged violations of the Employee Retirement Income Security Act (ERISA). According to a DoL news release, also being sued are trustees of the company's employee stock ownership plan (ESOP), its attorney, certified public accountant, and valuation adviser. The lawsuit alleges that the defendants imprudently used ESOP assets to purchase company stock from President and Chief Executive Officer Clair R. Couturier Jr. at an inflated price, and engaged in transactions that caused millions of dollars of harm to the ESOP and its participants while enriching themselves." (PLANSPONSOR.com; free registration required)
[Guidance Overview] IRS Private Letter Ruling Makes It Easier to Qualify for Deferral of Taxes in Connection with Sale of Stock to Employee Stock Ownership Plan (PDF)
2 pages. Excerpt: "In Private Letter Ruling 200827018, the IRS ruled that for purposes of deferring tax under Section 1042 of the Internal Revenue Code (the Code), a shareholder's holding period in the company's stock includes the period during which the shareholder held membership interests in a limited liability company that was the company's predecessor." (Morgan, Lewis & Bockius LLP)
[Guidance Overview] Court Bars ESOP-Owned Company from Advancing Defense Costs of Officers Accused of ERISA Fiduciary Breach (PDF)
At page 6 of 9 pages. Excerpt: "In Johnson v. Couturier, 2008 WL 4443085 (E.D. Cal. Sept. 26, 2008), a district court issued an injunction barring an employee stock ownership plan (ESOP)-owned company from advancing the costs of defense under the corporate officers' indemnification agreements with the company. The lawsuit alleged that the corporate officers had breached their ERISA fiduciary duties by engaging in a 'scheme to defraud' the ESOP-owned company by paying themselves grossly excessive compensation. The court found that plaintiffs had shown a substantial likelihood of success on this claim." (Proskauer Rose LLP)
Employee Ownership Update for November 3, 2008
NCEO Executive Director Corey Rosen discusses the results of a new NCEO survey on the effects of the credit crunch on ESOP companies; five research fellowships in employee ownership sponsored by the Beyster Institute and Rutgers; a renewed push for broader employee ownership in France; and the 2009 cost-of-living increases for benefit plan dollar limitations from the IRS. (National Center for Employee Ownership)
ESOP Fables: The Impact of Employee Stock Ownership Plans on Labor Disputes
Excerpt: "The presence of an ESOP is likely to result in a reduced incidence of company strikes, report researchers analyzing data associated with major collective bargaining negotiations from 1970 to 1995. Although the number of holdouts may increase as a result, the overall costs of labor disagreements will be less, they say. The authors also conclude that stockholders of a unionized company adopting an ESOP will experience a larger gain than will stockholders of a non-unionized company adopting an ESOP." (Mercer LLC)
[Guidance Overview] Chart of 415, Etc., Limits Updated for News Release IR-2008-118
The chart of maximum limits subject to inflation indexing at Carol V. Calhoun's employee benefits site has now been amended to include the newly announced 2009 limits. Among other things, the chart shows limits under sections 415, 403(b), 401(k), and 457, as well as the Social Security wage base and Social Security and Medicare tax rates, for 1996-2009. (Calhoun Law Group, P.C.)
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