Pending approval by the SEC, the termination of the plan would allow employees to access their accounts and sell their holdings, a United spokesman told the Associated Press. However, what will not really be impacted is employee control of the plan, which ended when their shares dropped below 20% of the total.
The real selloff began in September when it appeared that the airline was headed for bankruptcy and State Street, the trustee for the plan, began unloading UAL shares until the company objected (See Judge Puts Brakes on UAL’s ESOP Sell Off ). At the time, United feared a mass exodus of employees out of company stock could trigger a shift in company ownership and therefore tax benefits the company was counting on called net operating losses (NOLs).
However, in March the Internal Revenue Service (IRS) handed down a special ruling that assured thecompany that the trustee for United’s ESOP can sell an additional 3.9 million shares and United can still keep tax benefits. The change in ownership, or “sunset,” occurred after employees sold enough of their holdings to no longer own more than 20% of the company. This after employees had owned as much as 55% of the company in 1994 (See Tax Ruling in Hand, United ESOP Sales Set to Resume ).