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<< Older News  |  September 27, 2021


All News > ESOPs

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ESOPs: Current Trends in DOL and IRS Investigations
McDermott Will & Emery Link to more items from this source
Sept. 24, 2021

45 presentation slides cover [1] The broad scope of authority under which the Federal government reviews ESOPs and the discretion given to each region to enforce ESOP compliance; [2] Common allegations raised against ESOPs; and [3] How to prepare an effective record in advance of an investigation.

Tags: ESOPs  •  Plan Audits by Government Agencies

District Court Rules Decisively Against DOL in ESOP Valuation Case
National Center for Employee Ownership [NCEO] Link to more items from this source
Sept. 21, 2021

"The judge ruled that the DOL's valuation 'rests on errors' because its expert failed to follow standard valuation practices, used inaccurate and incomplete information about the company's finances, and improperly compared the price the ESOP paid to a very preliminary lower offer from another company." [Walsh v. Bowers, No. 18-0155 (D. Hawaii, Sep. 17, 2021)]

Tags: ESOPs

ERISA Plan Terms Control Against Defendants, Too
Seyfarth Link to more items from this source
Aug. 4, 2021

"The Ninth Circuit [held] that the doctrine of equitable estoppel could not be invoked against an ERISA plan trustee to contradict the terms of the plan. Allowing the terms of the side agreement to prevail, the court stated, would plainly violate those Plan terms mandating that the Plan not pay more than fair market value. The Ninth Circuit thus joined the Fourth Circuit in barring the defensive use of equitable estoppel to contradict an ERISA plan's express terms." [Wong v. Flynn-Kerper, No. 19-56289 (9th Cir. Jun. 7, 2021)]

Tags: ESOPs  •  Retirement Plan Design

Seventh Circuit Holds ERISA Does Not Preempt Bankruptcy Creditors' State Law Claims Against Corporate Directors and Officers
Roberts Disability Law Link to more items from this source
July 30, 2021

"The court noted the limited precedent in this area but that the Fifth Circuit and several district courts have held that ERISA does not preempt corporation-law claims against dual-hat directors and officers." [Halperin v. Richards, No. 20-2793 (7th Cir. Jul. 28, 2021)]

Tags: ERISA Preemption  •  ESOPs  •  Fiduciary Duties

DOL Private Pension Plan Bulletin: Abstract of 2018 Form 5500 Annual Reports (PDF)
Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL] Link to more items from this source
July 13, 2021

72 pages. "The total number of pension plans grew again in 2018, to approximately 721,900, a 1.7 percent increase over 2017. The number of DC plans grew by 1.8 percent, while the number of DB plans increased by 0.4 percent.... Of the 139.8 million total participants in private pensionplans, 96.4 million were active.... The number of 401(k) type plans increased by 2.9 percent,from 571,800 to 588,500. There were 70.3 million active participants in 401(k) type plans ... Of the 721,900 plans, 714,7 00 were single employer, 2,500 were multiemployer, and 4,700 were multiple-employer."

Tags: 401(k) Plans  •  ESOPs  •  Retirement Plan Administration  •  Retirement Plan Design

What the Supreme Court's Decision in a 401(k) Fee Case Could Mean for ESOPs
Faegre Drinker Link to more items from this source
July 13, 2021

"It is difficult, if not impossible, to reconcile the Supreme Court's analysis in the two 'stock drop' cases with the analysis conducted by courts in ESOP cases.... The Supreme Court's analysis, including how it interprets ERISA provisions, what consideration it gives to ERISA's legislative history and what consideration it gives to the context of the fiduciaries' decision, may provide further support for dismissal arguments in ESOP cases."

Tags: ESOPs  •  Fiduciary Duties

Ninth Circuit Reaffirms Exacting Pleading Standard for Duty-of-Prudence Claims Against ESOP Fiduciaries
Paul, Weiss, Rifkind, Wharton & Garrison LLP Link to more items from this source
May 12, 2021

"The decision provides important protection to ESOP fiduciaries by reaffirming the rigorous pleading standard in ESOP duty-of-prudence cases, in which plaintiffs must plead 'context-specific' allegations describing an alternative action 'so clearly beneficial' that a prudent fiduciary 'could not conclude that it would be more likely to harm the fund than to help it.' " [Wilson v. Craver, No. 18-56139 (9th Cir. Apr. 19, 2021)]

Tags: ESOPs  •  Fiduciary Duties

Ninth Circuit Upholds Dismissal of ERISA Lawsuit Against Edison International ESOP
Chief Investment Officer [CIO] Link to more items from this source
May 5, 2021

"The appeals panel held that the plaintiff failed to state a duty-of-prudence claim 'because she failed plausibly to allege an alternative action so clearly beneficial that a prudent fiduciary could not conclude that it would be more likely to harm the fund than to help it.' The panel held that, on their own, general economic principles are not enough to constitute duty-of-prudence violations." [Wilson v. Craver, No. 18-56139 (9th Cir. Apr. 19, 2021)]

Tags: ESOPs  •  Fiduciary Duties  •  Retirement Plan Investments

Editor's Pick Biden Tax Plan Would Spur Sales to ESOPs
National Center for Employee Ownership [NCEO] Link to more items from this source
May 5, 2021

"The proposal would significantly increase capital gains taxes for wealthy individuals, marginally increase the top individual tax rate, and increase the top marginal corporate tax from 21% to 28%.... Whether the changes are good economic policy or not, or are likely to pass in any form, will be hotly debated. But their impact on ESOPs could be dramatic."

Tags: ESOPs

Curtain Falls on IBM Stock-Drop Case
Mercer Link to more items from this source
May 3, 2021

"After more than five years of litigation and a trip to the Supreme Court, the ERISA stock-drop litigation against fiduciaries for IBM's [ESOP] has ended with a modest $4.75 million settlement ... The opinion of the 2nd US Circuit Court of Appeals in the case -- which found plaintiffs' pleadings sufficient to survive a motion to dismiss -- still stands, possibly leaving a narrow path for future stock-drop litigation." [Jander v. Ret. Plans Comm. of IBM, No. 15-3781 (S.D.N.Y. memorandum in support of motion for approval of settlement proposal, April 2, 2021; order approving settlement Apr. 28, 2021)]

Tags: ESOPs  •  Fiduciary Duties  •  Retirement Plan Investments

Major ESOP Initiative Moves Forward in Texas
National Center for Employee Ownership [NCEO] Link to more items from this source
Apr. 28, 2021

"The bill would: [1] Allow professional corporations to be owned by ESOPs ... [2] Allow certified Historically Underutilized Businesses (HUBs) to adopt an ESOP without losing their status as an HUB. [3] Create contracting preferences at the state, city, council, and special district level for ESOPs. [4] Establish an Employee Ownership Assistance Office in the Texas Economic Development and Tourism Office."

Tags: ESOPs  •  Local Regulation  •  Retirement Plan Policy

Ninth Circuit Affirms Dismissal of Suit Against Fiduciaries of Edison International ESOP
Roberts Disability Law Link to more items from this source
Apr. 20, 2021

"Following the current of its sister circuits, the Ninth Circuit found that the ESOP plan participant failed to allege a breach of fiduciary duty. This decision highlights the difficulty for plaintiffs to meet the duty-of-prudence pleading standard announced in Fifth Third Bancorp v. Dudenhoeffer[.]" [Wilson v. Craver, No. 18-56139 (9th Cir. Apr. 19, 2021)]

Tags: ESOPs  •  Fiduciary Duties

Best Practices for Fiduciary Review of ESOP Valuations
Frost Brown Todd LLC Link to more items from this source
Feb. 5, 2021

"[T]he DOL has entered into a number of 'process agreements' settling specific cases and investigations it has brought against ESOP trustees. These process agreements set out steps those trustees are required to take when selecting a valuation advisor and reviewing that advisor's valuation report."

Tags: ESOPs  •  Fiduciary Duties

DOL Settlement Takes Aim at Indemnification for ESOP Fiduciaries
Polsinelli, via JDSupra Link to more items from this source
Jan. 27, 2021

"While many of the earlier settlements with ESOP fiduciaries have provided helpful guidance in assessing a potential transaction, the Order continues a trend started a year ago regarding indemnification that could lead to the end of legally permissible indemnification arrangements. This development underlines the importance of proper consideration of the totality of potential sources of funding for litigation budgets ... when negotiating their engagement with an ESOP or ESOP sponsor given that indemnification may not provide adequate cover." [Scalia v. Professional Fiduciary Services, LLC, No. 19-7874 (S.D.N.Y. proposed settlement filed Jan. 12, 2021)]

Tags: ESOPs

The Truth About S Corporation ESOPs
Employee Benefits Law Group Link to more items from this source
[Guidance Overview]
Jan. 22, 2021

"The tax savings opportunities for S corporation ESOPs are substantial, providing fertile ground for creative tax structuring and strategies.... [In 2001,] Internal Revenue Code Section 409(p) was added to limit the tax benefits of ESOPs maintained by S corporations to those in which the ESOP is designed to provide a meaningful benefit to a broad base of rank-and-file employees. Section 409(p) is essentially an ownership concentration test designed to assure broad-based employee ownership within the ESOP."

Tags: ESOPs

ESOP Pass-Through Voting and the New DOL Guidance on Proxy Voting
National Center for Employee Ownership [NCEO] Link to more items from this source
Dec. 16, 2020

"The issue of whether trustees can and should override participant directions on offers to buy shares in a proposed acquisition of an ESOP company has been one of the most ambiguous areas of ESOP law and practice.... In practice, it is exceedingly rare for employees to vote no on a good offer, and there is no litigation in closely held companies where this has been an issue. That does not make the issue moot, however."

Tags: ESOPs

Delegating Fiduciary Responsibilities Related to ESOP Results in Dismissal of ERISA Stock-Drop Claims
Proskauer Link to more items from this source
Dec. 4, 2020

"The plaintiffs alleged that the Boeing defendants breached their ERISA fiduciary duties by concealing problems with the 737 Max, which allegedly caused Boeing's stock price to be artificially inflated and ultimately to decline once the problems with the 737 Max were made public.... [T]he court determined that the investment committee had delegated all fiduciary responsibilities related to the ESOP to an independent fiduciary and that no defendant in the action had fiduciary responsibilities related to the ESOP." [Burke v. The Boeing Co., No. 19-2203 (N.D. Ill. Nov. 12, 2020)]

Tags: ESOPs  •  Fiduciary Duties

Implementing an ESOP: Decisions You Need to Make
Meaden & Moore Link to more items from this source
Dec. 1, 2020

"[1] Determine employee eligibility ... [2] Determine ESOP vesting period ... [3] Determine annual contributions ... [4] Determine distribution standards ... [5] Ensure your plan meets regulatory guidelines."

Tags: ESOPs  •  Retirement Plan Design

Restatement Period Opens for Pre-Approved Plans
Blue Ridge ESOP Associates Link to more items from this source
Nov. 25, 2020

"Some of the new provisions in the Cycle 3 documents will include: [1] Windsor decision (new definitions of marriage and spouse); [2] Reduction of safe-harbor contributions; [3] Using forfeitures to pay for safe harbor contributions; [4] In-plan Roth conversion.... [W]ith the new Cycle 3 documents, a company that sponsors an ESOP may be able to use a pre-approved document for the first time."

Tags: ESOPs  •  Retirement Plan Amendments

Segregation of ESOP Participant Accounts
Blue Ridge ESOP Associates Link to more items from this source
Nov. 25, 2020

"An ESOP must have a written provision in the plan document in order to implement segregation. Based on the terms of the provision and generally on an annual basis, all or a portion of stock held in the accounts of terminated participants will be exchanged for cash from active participant accounts. At the same time, the active participants will receive the stock from terminated accounts in exchange for their cash. As a result, stock is 'reshuffled' between terminated and active accounts in the Trust."

Tags: ESOPs  •  Retirement Plan Administration

ESOP Repurchase Obligations: What to Record When Buying Back Shares
Berry, Dunn, McNeil & Parker, LLC Link to more items from this source
Nov. 19, 2020

"Disclosures must include the number of allocated shares and the fair value of those shares as of the balance sheet date.... [T]he intention is to communicate maximum repurchase obligation exposure. If redemptions subsequent to the balance sheet date require material and imminent use of cash, the company should consider whether it is required to disclose them as a subsequent event (including amounts) under ASC Topic 855, Subsequent Events."

Tags: ESOPs

Pre-Approved ESOP Plan Documents Make Your Life Easier
Employee Benefits Law Group Link to more items from this source
Sept. 24, 2020

"Historically, ESOPs were custom written documents produced by lawyers, which had to be submitted to the [IRS] for approval. These documents could be costly to amend and maintain. With the arrival this summer of IRS pre-approved 'checklist driven' ESOP documents (similar to 401(k) plans), it is no longer necessary for individual employers to submit these plans to the IRS for approval. As an added bit of flexibility, the due date to decide whether to adopt an ESOP is extended, giving more flexibility for tax deductions."

Tags: ESOPs  •  Retirement Plan Amendments

How to Successfully Navigate a DOL ESOP Investigation
Findley Link to more items from this source
Aug. 31, 2020

"Because the DOL does not detail their selection process, understanding why your ESOP is under investigation remains unclear.... DOL enforcement agencies typically provide little advance notice, so knowing how to respond before an investigation begins is critical.... [T]he department does provide online access to its enforcement manual, detailing their internal audit guidelines and checklists."

Tags: ESOPs  •  Plan Audits by Government Agencies

The Fair Market Value Standard for ESOP Transactions: Are the DOL and Some Courts Getting It Wrong? (PDF)
McDermott, Will & Emery and Gibraltar Business Valuations, for National Center for Employee Ownership [NCEO] Link to more items from this source
Aug. 19, 2020

36 presentation slides. Topics: [1] Overview of ERISA standards for an ESOP transaction. [2] Additional sources of guidance. [3] What is 'fair market value'? [4] Where the DOL and courts have gone wrong. [5] Suggestions going forward.

Tags: ESOPs

IRS Employee Plans News: Additional Instructions for ESOPs and DB Plans Regarding 3rd Cycle Submissions (PDF)
Internal Revenue Service [IRS] Link to more items from this source
[Official Guidance]
Aug. 11, 2020

Aug. 10, 2020. This issue includes specific instructions for 3rd Cycle submissions: [1] completing Form 5307 for ESOPs, and [2] completing submissions for pre-approved DB plans. The 3rd cycle submission window opens August 1, 2020.

Tags: ESOPs  •  Reporting to Government Agencies  •  Retirement Plan Amendments

<< Older News  |  September 27, 2021

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