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ESOP Transactions and Compliance Issues: Structuring Options, SECURE 2.0, IRS Expanded Focus, Fiduciary Liability


Oct. 18, 2023
Recorded Online

This CLE course will provide ERISA counsel and plan sponsors guidance on employee stock ownership plan (ESOP) transactions and compliance issues in light of recent IRS expanded focus on ESOP plans. The panel will discuss rules and procedures governing fiduciary and compliance responsibilities of trustees and advisers in ESOP transactions, SECURE 2.0 ESOP provisions and expanded IRS focus, structuring options, and best practices in satisfying fiduciary duties in ESOP transactions and avoiding litigation.


A variety of transaction planning methods for ESOPs are available to plan sponsors and fiduciaries to address specific needs while also meeting regulatory requirements. However, new rules under SECURE 2.0 and the IRS' recent expanded focus on ESOPs add another layer of complexity for ESOPs and related transactions.

An ESOP can be a useful financing and acquisition tool in addition to the tax and employee benefits it provides. The DOL heavily scrutinizes the design and structure of ESOP transactions with significant oversight. Examination of ESOP transactions by regulatory authorities involves a thorough review of the financial structure of the deal, any value adjustments after that, and potential conflicts of interest leading to a breach of fiduciary duties.

Under SECURE 2.0, key provisions impacting ESOPs include (1) amending Section 1042 of the IRC to allow limited application of tax deferral on a sale of stock to S corporation ESOPs; (2) amending Code Section 401(a)(35) to change the definition of "publicly traded" for diversification requirements; (3) directing the DOL to create an Employee Ownership Initiative; and (4) directing the DOL to release formal guidance on ESOP valuation standards.

Finally, on Aug. 9, 2023, the IRS announced that it will undertake enforcement strategies to ensure compliance with tax law requirements, with a focus on a variety of ESOP transactions. Knowledge of advanced transaction structures will allow ERISA counsel to develop the most effective methods for an ESOP transaction inclusive of alternatives to achieve the goals and objectives of the parties involved while also complying with applicable regulations.

Listen as our panel discusses rules and regulations impacting ESOP transactions, DOL guidance, handling IRS examinations, and other critical issues associated with structuring ESOP transactions.


  1. Overview of regulations and federal guidance concerning ESOP transactions
  2. SECURE 2.0 rules affecting ESOPs
  3. Key provisions for ESOP transaction agreements
  4. Overview of fiduciary duties, policies, and procedures of ESOP transactions
  5. Fiduciary review process: projections, documentation, and reliance
  6. Best practices in handling IRS and DOL examinations

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