"A federal judge in Chicago certified a class of former employees suing the consulting firm West Monroe Partners, allowing their claims to proceed collectively based on allegations that the company undervalued its stock and shortchanged workers cashing out of its defined contribution employee stock ownership plan....Weeks after those employees were paid out, West Monroe sold a 50% stake in the company to a private equity firm at $1,616 per share -- more than three times the earlier valuation, raising questions about whether employees were paid fair market value." [Daly v. West Monroe Partners, Inc., No. 21-6805 (N.D. Ill. Mar. 27, 2026)] MORE >>
"[T]he judge ruled that the decision to releverage was a corporate decision appropriately made by the board of directors. The fiduciary obligation rests with the ESOP trustee, GreatBanc, to make sure that the price that the ESOP pays is at fair market value and that the terms of the deal are not harmful to the plan participants." [Shipp v. Central States Mfg., Inc., No. 23-5215 (W.D. Ark. Mar. 30, 2026)] MORE >>
"In entering judgment for the company-side defendants, the court held that 'no reasonable jury could find that the two-step releveraging transaction was anything but a corporate decision' outside of ERISA's scope that was 'made with the financial health of the company in mind.' As such, the members of the company's board of directors and/or executive management team could not be liable as ERISA fiduciaries, except to the extent they had a duty to monitor the trustee." [Shipp v. Central States Mfg., Inc., No. 23-5215 (W.D. Ark. Mar. 30, 2026)] MORE >>
"Agreeing to indemnify others in a transaction would impose additional liabilities and financial risks on the ESOP without providing any participant benefit. That kind of risk assumption would be inconsistent with the trustee's fiduciary duties and would almost certainly constitute a breach under ERISA." MORE >>
"The court emphasized that ESOP trustees must actively investigate red flags and advocate for plan participants, rejecting arguments that a trustee may simply rely on process formalities. Although this litigation remains in the early stages, the court's refusal to dismiss most ERISA fiduciary claims reinforces the judiciary's expectation that ESOP fiduciaries must actively safeguard participant interests." [Sawlaw v. GreatBanc Trust Co., No. 25-0624 (W.D. N.C. Mar. 2, 2026)] MORE >>
"The [ERISA Litigation Reform Act's (HR 6084)] main provisions would: [1] Change the burden of proof for adequate consideration ... [2] Change the current burden of proof to require plaintiffs to prove that service provider fees were not reasonable and not necessary. [3] Ensure that the expensive and time-consuming process of discovery does not occur until a court has decided a claim may move forward." MORE >>
"Several recent federal district court decisions have focused on the scope of the ESOP diversification exemption and reached different conclusions as to whether ESOP fiduciaries can be held liable for failing to diversify the ESOP's non-employer stock assets.... Until there is further clarity from the courts or [DOL], ESOP fiduciaries should not assume that the diversification exemption bars all challenges to the investment of an ESOP's non-employer stock assets." MORE >>
"The Trump administration is reorienting the [DOL's] approach to employee stock ownership plans, signaling it will pursue fewer lawsuits and investigations while focusing on awarding grants.... ESOP attorneys and advocates suggest the combination of re-calibrated enforcement, a forthcoming valuation regulation, and more education and outreach could lead to more employee-owned businesses." MORE >>
"A February 17, 2026, memo to the [FASB] from the Private Company Council (PCC) ... raises the issue of whether the FASB should reconsider its current rules for accounting for ESOP repurchase obligations in private companies. Drawing on NCEO research, the memo says that private company ESOPs have grown significantly since the FASB last looked at this issue in 1993." MORE >>
"The report notes that from 2013 through 2023, the number of ESOP participants grew by 8%, driven largely by leveraged ESOPs and nonleveraged public company KSOPs. The number of nonleveraged stand-alone ESOPs declined.... [T]he report estimates that these firms employ 13,520 people and have a total combined revenue of $806 million, with the number of worker co-ops doubling over the last 10 years." MORE >>
"Employee Stock Ownership Plans (ESOP) are on the rise, as is employee ownership in general, according to the Employee Ownership Initiative Report. The report also noted that mandates given to [EBSA] to promote employee ownership have not been properly funded." MORE >>
"EBSA established the Employee Ownership Initiative and built a solid foundation for future programs in less than two years ... DEO built relationships with a wide range of federal, state, industry, and community stakeholders; spoke at events and generated articles and blogs; advised state partners and employers; and created a website to educate the public about employee ownership, employee participation, and related state programs." MORE >>
"If the business operates as a corporation and the owners sold all or part of their shares to an ESOP, both the owners and the company could qualify for very significant tax benefits that would not be available if the shares were sold to a strategic or private equity buyer." MORE >>
"In the last five filing years, the number of ESOPs at privately-held companies has been trending upward. During the same period, the number of ESOPs at publicly-held companies has decreased by 18%. The number of active participants at all ESOPs has grown by 781,872, with most of that coming from privately-held ESOPs." MORE >>
"In October, the Western District of North Carolina dismissed a challenge to the investment strategy for [other investment account (OIA)] assets ... [holding] that the plaintiff failed to adequately allege that the defendants acted imprudently under ERISA, including because ESOP fiduciaries are exempt from ERISA's duty to diversify plan assets. The plaintiff appealed the October decision to the Fourth Circuit, making it the first OIA case to reach an appeals court." [Trull v. McCreary Modern, Inc., No. 25-0011 (W.D. N.C. Oct. 1, 2025; on appeal to 4th Cir. No. 25-2337, appellant's brief filed Jan. 5, 2026)] MORE >>
"Section 280E of the Internal Revenue Code prevents taxpayers from claiming deductions for expenses related to carrying on a trade or business that involves trafficking Schedule I or II substances under the Controlled Substances Act (CSA).... In a non-leveraged ESOP, company contributions to the ESOP to buy shares are tax-deductible. In a leveraged ESOP, the company makes tax-deductible contributions so the ESOP can repay acquisition debt. The key benefit for cannabis operators is that ESOPs do not pay federal income tax on their proportionate share of S-corporation income." MORE >>
"In most ESOP transactions, particularly leveraged buyouts, there is an inherent conflict between the goals of selling shareholders and the goals of the ESOP.... The independent trustee serves as the neutral fiduciary, charged with evaluating the transaction and deciding whether the ESOP should proceed. This includes the initial transaction forming the ESOP and any subsequent transactions involving an ESOP. The independent trustee works to make sure these inherently conflicted transactions meet regulatory requirements by remaining arms-length transactions." MORE >>
73 pages. "The total number of pension plans grew ... to approximately 836,800, a 4.4 percent increase over 2022. The number of DC plans grew by 4.7 percent, while the number of DB plans decreased by 0.6 percent.... The number of 401(k)-type plans increased by 5.6 percent, from 686,000 to 724,700.... There were 81.6 million active participants in 401(k)-type plans, reflecting a 2.7 percent increase from 2022." [Also available: data tables in XLSM and XML formats; and Historical Tables and Graphs, 1975-2021.] MORE >>
"An ESOP audit provides assurance that the right employees are receiving the right benefits at the right time. It also verifies that plan activity aligns with the governing plan document and accounting rules.... Auditor guidance and standards ... Phases of an ESOP audit ... Tips for a smoother audit ... Common pitfalls ... Valuation reviews: more than a compliance step ... Red flags in valuation reviews." MORE >>
"[T]he American Ownership and Resilience Act (AORA) [HR 3248;S 1645] would expand pools of investment capital necessary to grow the field while respecting the original intentions of the founders of ESOP legislation to create not ephemeral employee ownership but stable, long term employee ownership which broadens participation in business ownership and strengthens the American economy." MORE >>
"Private equity firms are seeking a new legal definition of an ESOP, a new structure of tax benefits only they can receive, and broad exemptions from five decades of employee protections embedded in [ERISA].... [S]ober analysis of their public assertions and privately shared plans surfaces tremendous problems for the future of existing, and not yet formed, ESOP companies." MORE >>
"Pete Stavros, founder of Expanding ESOPs, shared ... a much more detailed public policy proposal with the ultimate aim not to promote ESOPs as we know them today, but to convince Congress to create a new type of qualified retirement plan under [ERISA] and to call them ESOPs. ... TEA agrees with some of the issues Expanding ESOPs highlights in its principles. However, the detailed STEP policy proposal is the wrong solution if the true goal is employee ownership and building retirement wealth for employee owners." MORE >>
"Prevalent among public and private organizations alike, [annual incentive plans (AIPs)] often are reserved for senior professional and management positions. However, in [one] study, 52% of ESOPs extend AIP eligibility to all employees. This compares to only about one-third of private and public companies ... The prevalence of LTIs among ESOPs are more aligned with that of private companies at approximately 80%, compared to 99% among public companies." MORE >>
28 pages. "A few of the most common forms of employee ownership are the Employee Stock Ownership Plan (ESOP), Employee Ownership Trust (EOT), Employee Stock Option Plan (ESO), Restricted Stock Units (RSU) and Worker Cooperatives (co-ops).... Employee ownership isn't meant as a replacement for wages or retirement plans. Rather, it is meant to supplement wages and help employees build generational wealth and greater autonomy in the workplace." MORE >>
"S 2403, the Retire Through Ownership Act ... would ... [a]mend the definition of 'adequate consideration' under ERISA to provide a fiduciary with good faith reliance on the methodologies set forth under [Rev. Rul. 59-60] in determining the fair market value of an asset." MORE >>
