Tag: employee stock ownership plans
The court decision highlights the difficulty in determining the fiduciary status of parties and of making claims for equitable relief based on allegations that ESOP stock purchases were overvalued.
Among other things, workers with employee ownership experienced layoffs six times less often than those without, and employee turnover can be three times lower in employee-owned companies, according to the study.
A federal court judge cited a 5th U.S. Circuit Court of Appeals decision in Chaplin v. NationsCredit Corp. that concluded, “Although the release does not specifically mention ERISA, it need not do so, as general ‘any-and-all language covers a claim for ERISA benefits.’”
The IRS explains that the rules under IRC Section 409(p) are designed to prevent a group of “disqualified persons” from collectively owning 50% or more of an S corporation’s stock (i.e., the definition of a “nonallocation year”), and discusses methods for preventing violation of the rules.
In addition, 55% of responding companies contributed to their ESOPs an amount equivalent to 11% or more of participants’ pay—far surpassing the typical 401(k) match.
In a letter, members of Congress accuse the DOL of “regulation through litigation” and ask that clear guidance regarding valuation and other important issues be developed.
Among other things, the Main Street Employee Ownership Act focuses on increasing the role of the Small Business Administration (SBA) in facilitating ESOPs by allowing the SBA to make loans to companies that they can then reloan to ESOPs.
The bill would amend Section 7(a) of the Small Business Act, expanding loans to small business employers for the purpose of transferring ownership of the company to employees.