Can plan participants be treated as separate shareholders?

[Guest halka]

A participant-directed 401k has a publicly traded Eer Stock investment option. The Eer Stk option is and will remain a frozen option. Some Eer Stock is employer contribution; some purchased. Company wants to go semi-private via reverse split by which all shareholders of less than XX shares will be cashed out. The Company proposes to treat each participant in the Eer Stk option as an separate shareholder of number of shares equal to his proportionate beneficial interest in the Eer Stk option. This results in most rank & file participants being cashed out while HCE’s that have large investments in the Eer Stk option retaining their post-split ownership. Two questions:

1. Are there any rulings that explicitly permit/prohibit treating each participants as a discreet shareholder (as opposed to treating the Plan a the single shareholder) for this type of transaction?

2. If one uses the Company approach, does the transaction result in a discriminatory benefit for the HCE’s?

THANKS

[Lame Duck]

you also need to consider whether you have a breach of fiduciary duty. Presumably, the HCEs who will retain their ownership in the comapny are also the Plan fiduciaries. Is the action in the best interest of all plan participants, or just their own interest? My initial reaction is the latter.