Source: http://esoppartners.com/blog/?month=3&year=2010
Timestamp: 2013-06-20 11:45:56
Document Index: 54130693

Matched Legal Cases: ['§ 1', '§ 1', '§ 1', '§ 1', '§ 1', '§ 1', '§ 1', '§ 1', '§ 1']

March, 2010 | The One-Stop ESOP Blog | Your Resource For All Things ESOP
RSS Feed The ESOP Association Files Amicus Brief
Posted by Aaron Juckett on Tue, Mar 30, 2010
Email Article Tweet In the In re Citigroup ERISA Litigation, No. 07 Civ. 9790, 2009 WL 2762708 (S.D.N.Y. Aug. 31, 2009) ruling, the district court found that Citigroup did not breach its ERISA fiduciary duties by offering stock as a retirement plan option while the stock was incurring major losses. The case is on appeal. Read More
Lower Valuations Make ESOPs More Attractive
Posted by Aaron Juckett on Mon, Mar 29, 2010
Email Article Tweet We have previously discussed how the sales prices of a closely held company was down 25%+ percent in 2008 and 2009. ESOPs on the Rise Among Small Businesses provides a very positive yet balanced look at ESOPs and discusses how lower valuations in the traditional marketplace are making ESOP transactions more attractive:Read More
S Corporation ESOPs Perform Better During a Recession
Posted by Aaron Juckett on Thu, Mar 25, 2010
Email Article Tweet A press release announced a new study, RESILIENCE AND RETIREMENT SECURITY: Performance of S-ESOP Firms in the Recession, that found that S Corporation ESOPs outperformed their non-ESOP counterparts during the recent recession in job creation, revenue growth, and providing higher wages and retirement security: Read More
Tags: Studies and Statistics, ESOP Benefits, ESOP, employee stock ownership plan
Neil v. Zell, N.D. Ill. 2009, No. 08 C 6833
Posted by Aaron Juckett on Wed, Mar 24, 2010
Email Article Tweet We have discussed how the Tribune Company Filed for Bankruptcy and how the Tribune ESOP is Being Terminated. A group of current and former employees filed a lawsuit on September 16, 2009. In a December 17, 2009 Memorandum Opinion and Order (Neil v. Zell, N.D. Ill. 2009, No. 08 C 6833), a federal judge dismissed some claims and ruled that other parts of the lawsuit can proceed. Employee Benefits Developments February 2010 discusses the case: Read More
IRS Form 5500 Electronic Filing Requirements
Posted by Aaron Juckett on Mon, Mar 22, 2010
Email Article Tweet The Employee Plans News  Spring 2010 Edition discusses the new IRS Form 5500 electronic filing requirements: Read More
Email Article Tweet In Shared Ownership Firms Report Substantially Larger Return on Assets we discussed selling to an ESOP in phases. In addition to providing a ready market for an otherwise illiquid asset and providing the owner with diversification and liquidity while retaining control of the company, it helps set the stage for a gradual business transition. The lead director's role in succession planning discusses the board's role in succession planning for both the CEO and the management team:CEO succession: emergency planLDN members believe it is critical for all companies to draft an emergency CEO succession plan and to review that plan annually. But they disagree on the specificity of these plans. Some companies have a very detailed plan; other companies have a less formal plan.CEO succession: orderly, long-term plan LDN members agree on the importance of having a long-term succession plan that has been carefully developed over months and years. This plan generally defines the roles and responsibilities of the board and management, gives a timeline for CEO succession, assesses future business needs, lists the wanted attributes and experiences of the next CEO, creates opportunities for board members to interact with CEO candidates, and provides for open dialogue between the board and the current CEO about the process.CEO succession: specific roles and responsibilities Members agree that the board  either in full or through a committee  has primary responsibility for developing and executing the CEO succession plan. The lead director also plays a vital role in CEO succession planning, aggregating feedback on candidates and driving the board to consensus. The CEO's perspective on candidates is an important contribution. Members also agree that if a company hires a search firm to help with the succession process, the lead director or a committee of the board should manage the company's relationship with that firm.Management successionIn addition to being responsible for CEO succession, boards also provide oversight and support for the wider management succession process. LDN members report that boards often develop relationships with the top 20 or so senior executives over a period of years, relying on the company's management development program to ensure that lower-level executives are developed properly. The board's role is to review the program regularly to be sure it is working satisfactorily. Read More
Tags: ESOP, employee stock ownership plan, ESOP Corporate Governance
DOL Settlement Reaffirms ESOP Best Practices
Posted by Aaron Juckett on Fri, Mar 19, 2010
Email Article Tweet The March 16, 2010 Employee Ownership Update is online and discusses the following: Read More
Primary Responsibilities of Investment Committees
Posted by Aaron Juckett on Wed, Mar 17, 2010
Email Article Tweet All ESOPs have investments. While we know that by definition an ESOP is "designed to invest primarily in qualifying employer securities", that doesn't mean that you are off the hook for managing the investments of the plan. This is especially true if your plan has a cash balance. If you segregate or convert the accounts of terminated participants to cash (the IRS recently defined this as ESOP Reshuffling), the IRS has recently clarified that the plan must provide sufficient investment options.Do you have an investment committee? If so, how does your committee function? If not, is your trustee committee satisfying their fiduciary responsibility to manage the investments of the plan? Last year we took a look at some Investment Committee Best Practices. Hiring and firing investment managers: How does your committee compare? takes a look at the primary responsibilities of investment committees (finding, monitoring, and firing investment managers) and the findings of a recent survey. Here are some key takeaways: "Approximately 70% of respondents had hired and/or actively retained an investment manager, while 65% had fired an investment manager...The average length of retention is 5.8 years."The top five factors in hiring or firing (in order from most important) are performance, style consistency, consistency in the portfolio manager's business, continuity in the investment management staff, and investment management fees."As a result of the market change in 2008, more than 30% of committees increased their number of committee meetings. Previous Vanguard research has shown that increasing the frequency of meetings with a focused agenda can lead to higher levels of investment committee effectiveness."Read More
Methods of Employee Communications
Email Article Tweet Employee communications: Trends, fads and what's next discusses the how employee communications play a critical role in engaging employees: Read More
An IRS Analysis of ESOP Rebalancing and ESOP Reshuffling
Posted by Aaron Juckett on Tue, Mar 16, 2010
Email Article Tweet Last week we discussed how the IRS has informally defined ESOP Rebalancing and ESOP Reshuffling in a February 23, 2010 Response to Technical Assistance Request #4. Here are some highlights of the analysis and conclusions of memo:The right to be invested in employer stock is not a § 1.411(d)-4 Section 411(d)(6) protected benefit.Any provision must meet the requirements of a § 1.401-1(a)(2) definite written program and require a § 1.401-1(b)(1) definite predetermined allocation formula. Specifically, any provision providing for the mandatory transfer of stock must have language that "directs the plan administrator as to the number of shares or amount of cash to transfer in or out of plan accounts". The plan must also "state the manner in which the transfers will be effectuated, such as the date of valuation." A reshuffling provision "that affords an administrator discretion to choose which participants will receive or transfer shares violates § 1.401-1(b)(1) of the Regulations"Diversification rights under IRC Section 401(a)(28)(B) - Additional requirements relating to employee stock ownership plans - Diversification of investments and IRC Section 401(a)(35) - Diversification requirements for certain defined contribution plans include "a participant's right not to have shares diversified pursuant to such sections mandatorily transferred back into his or her account." Rebalancing or reshuffling does not violate the diversification regulations as long as the provisions "preclude shares diversified" from being "mandatorily returned to participants' accounts". In other words, the plan may not mandatorily reinvest a participant's account in stock after the participant has diversified those shares.The right of each participant to have or not have a particular form of investment is a plan right or feature subject to the current and effective availability requirements under § 1.401(a)(4)-4 Nondiscriminatory availability of benefits, rights, and features.Rebalancing  "Rebalancing, which treats all participants the same, will not raise issues of current and effective availability."Reshuffling  A plan provision "providing for the transfer of all employer securities from plan accounts of terminated employees" does not raise issues of current or effective availability because terminated employees comprise a coverage group under § 1.401(a)(4)-10 Testing of former employees. A reshuffling provision "will not fail to satisfy § 1.401(a)(4)-4 in form merely because it imposes age or service conditions on the availability of an investment option."Reshuffling provisions must comply with § 1.411(a)-11(c)(2)(i) Restriction and valuation of distributions - Consent and "not impose a significant detriment on a participant who does not consent to a distribution" and provide for sufficient investment options:§ 1.411(a)-11 Restriction and valuation of distributions.(2) Consent. (i) No consent is valid unless the participant has received a general description of the material features of the optional forms of benefit available under the plan. In addition, so long as a benefit is immediately distributable, a participant must be informed of the right, if any, to defer receipt of the distribution. Furthermore, consent is not valid if a significant detriment is imposed under the plan on any participant who does not consent to a distribution. Whether or not a significant detriment is imposed shall be determined by the Commissioner by examining the particular facts and circumstances.The memo cited Revenue Ruling 96-47 and provide more details:Accordingly, A plan providing participants with the option of an immediate distribution would need to have language that preserves sufficient investment options in order to ensure that the loss of the employer stock investment is not a "substantial detriment". For example, the plan might offer three alternative investment options such as described in Code Section 401(a)(28)(B) or might offer other choices that include a life-cycle fund or targeted-retirement-date fund. Since ESOPs and stock bonus plans may provide for the option of an immediate distribution upon termination of employment, we believe that it is appropriate to request language porviding for sufficient investment options. Read More
Tags: Compliance, ESOP, employee stock ownership plan
Shared Ownership Firms Report Substantially Larger Return on Assets
Posted by Aaron Juckett on Mon, Mar 15, 2010
Email Article Tweet A recent study, Governance Problems in Closely-Held Corporations, found that firms with shared ownership report a substantially larger return on assets and lower expense-to-sales ratios. Read More
DOL Settles High Profile ESOP Case
Posted by Aaron Juckett on Thu, Mar 11, 2010
Email Article Tweet In November 2008 we discussed how the DOL Sued the Board of Directors for Alleged ERISA Violations and misusing ESOP assets. The DOL has announced that they have obtained consent judgments recovering more than $12 million for employee stock plan participants in California and Washington:Read More
ESOP Rebalancing and ESOP Reshuffling Defined
Email Article Tweet The IRS issued a February 23, 2010 Response to Technical Assistance Request #4 with regard to ESOP rebalancing and ESOP reshuffling provisions. The memo was issued three days prior to the Hoffman v. Tharaldson Motels Inc. Employee Stock Ownership Plan, D.N.D., No. 3:08-cv-109, 2/26/10 ruling and defines rebalancing and reshuffling:Read More
Latest HEART Act Guidance
Posted by Aaron Juckett on Tue, Mar 09, 2010
Email Article Tweet In ESOP Planning 2009: Plan Documents and Disclosures we discussed how the Heroes Earnings Assistance and Relief Tax Act of 2008 (HEART Act) was one of the major pieces of Employee Benefits Legislation enacted in 2008. Some of the changes were retroactive to 2007 and others became effective January 1, 2009. An amendment must generally must be adopted by the end of the 2010 plan year. Read More
Tags: ESOP, employee stock ownership plan, Plan Document
Using an ESOP as an Exit Strategy
Posted by Aaron Juckett on Sun, Mar 07, 2010
Email Article Tweet The Journal of Accountancy (March 2010) has a great article on ESOPs. The ESOP Exit Strategy explores the advantages of using an ESOP as a succession planning tool:Read More
Tags: ESOP Benefits, ESOP, employee stock ownership plan
ESOPs Create Jobs
Posted by Aaron Juckett on Fri, Mar 05, 2010
Email Article Tweet Employee Ownership and Job Growth discusses the relationship between employee ownership and job growth and how Key Studies on Employee Ownership and Corporate Performance have found that employee owned companies outperform their counterparts. [ESOPs also Increase Employee Wealth and Wages and Provide Greater Employment Stability and Increase Job Satisfaction.] Read More
Hoffman v. Tharaldson Motels Inc. Employee Stock Ownership Plan, D.N.D., No. 3:08-cv-109, 2/26/10
Posted by Aaron Juckett on Wed, Mar 03, 2010
Email Article Tweet In Hoffman v. Tharaldson Motels Inc. Employee Stock Ownership Plan, D.N.D., No. 3:08-cv-109, 2/26/10, a U.S. District Court for the District of North Dakota found that a plan amendment providing for the conversion of stock to cash for the ESOP accounts of terminated participants (a.k.a. Segregation of Accounts) was not a violation of the anti-cutback provisions of IRC Section 411(d)(6)(C) - Minimum vesting standards - Special rules - Accrued benefit not to be decreased by amendment.Read More
The Congressional Company Visit
Posted by Aaron Juckett on Tue, Mar 02, 2010
Email Article Tweet Today I will be participating in an ESOP advocacy panel discussion on getting involved in government. We will be discussing the recent Positive ESOP Legislation and the need to Remain Vigilant. We will also be planning some trips to visit Capital Hill.Read More
Employee Ownership in the United Kingdom
Posted by Aaron Juckett on Mon, Mar 01, 2010
Email Article Tweet The March 1, 2010 Employee Ownership Update is online and discusses the following:Read More