DOL Issues to Watch for the Remainder of 2025
If the Senate confirms President Donald Trump’s choice of Daniel Aronowitz as assistant secretary of labor for the U.S. Department of Labor (DOL), benefits attorneys could see some major policy changes later this year. Enforcement of ERISA by EBSA Priorities in the enforcement of the Employee Retirement Income Security Act (ERISA) are likely to change, […]
Western Milling Employee Stock Plan Files ERISA Class Action Over ESOP
Jose Davalos, a former employee of Western Milling LLC, has filed a class action lawsuit in a California federal court, alleging that the company forced the sale of its employee stock ownership plan (ESOP) assets at an unreasonably low price. In preparation for a larger transaction in which Western Milling was sold to Viserion Milling […]
IRS Warns Plan Sponsors of ESOP Compliance Risks
The Internal Revenue Service (IRS) issued IR-2023-144 (“IRS Notice”) on August 29, 2023, which concerns Employee Stock Ownership Plans (ESOPs). These plans allow employees to accrue ownership of company stock over time. The IRS Notice warns employers who sponsor ESOPs to be wary of the many compliance rules that these plans involve. In particular, the […]
SECURE Act Eliminates Need to Adopt Retirement Plans and ESOPs by the End of 2021 for Tax Deduction Purposes
Before 2020, the IRS historically mandated that an employer must adopt an employee stock ownership plan (ESOP), and any other retirement plan, no later than the end of the first tax year in which the employer wanted to claim a deduction for plan contributions. Effective December 31, 2019, Section 201 of the Setting Every Community […]
When Should an Employer Consider an ESOP?
Employee Stock Ownership Plans (ESOPs) are popular both with owners looking for ways to increase employee engagement and involvement and with employees seeking to have some ownership in and benefit from the work they do beyond their salaries. For business owners, considering implementing an ESOP is one of many options they consider when looking at […]
Why an ESOP? Advantages to Employer of Deductible Cash Dividends to ESOP Participants
An Employee Stock Ownership Program or ESOP is a way for owners to share the wealth and success of a company with employees. It is often used for succession planning allowing long-term employees a way to buy out an aging owner and continue the business. ESOPs also offer some tax incentives to the company such […]
ERISA Rules Every ESOP Fiduciary Needs to Know to Avoid Breach Claims
Employee Stock Ownership Plan (ESOP) fiduciaries are governed by ERISA rules just as administrators of other qualified retirement and benefit plans are. This includes any person who has discretion or control in the management of plan assets, provides advice to the plan for a fee, or has responsibility for the administration of the plan. In […]
Recent ESOP Valuation Case Emphasizes Importance of Fiduciary Duty in CEO Buy-Out
Many businesses use Employee Stock Ownership Plans (ESOPs) to incentivize employees and as a succession planning tool for owners as they look to turn the business they created into a successful and thriving affair without selling it off to another company. ESOPs are governed, in part, under ERISA regulations. As with all ERISA-governed benefits plans, […]
New Publication Provides Comprehensive Analysis of DOL’s ESOP Investigations
The National Center for Employee Ownership recently released a guide that includes a comprehensive analysis of the Department of Labor’s (DOL) investigations of Employee Stock Ownership Programs. The report’s data comes from the DOL and covers the years 2007 through 2017. DOL investigations are further broken down by issues and results. While the report is […]
What are the Advantages and Disadvantages of a Phantom Equity Plan?
I was recently asked to describe the advantages and disadvantages of a phantom equity plan. Phantom equity plans are particularly useful for private companies without publicly traded shares of stock. Privately held companies have unique organizational traits that require a substantially different approach to executive compensation. Often, executive compensation arrangements that are appropriate in a publicly […]