ASA supports trustee, appraiser in ESOP litigation

I recently wrote an article about several cases being brought by the Department of Labor (DOL) against Employee Stock Ownership Plan (ESOP) trustees. The cases all related to the DOL’s claim that the ESOP trustees had breached their fiduciary duties by relying on appraisals prepared for the valuation of the ESOP owned stock. One such …

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ESOP Appraisers Will Not be Named as Fiduciaries…At Least for the Time Being

It was reported in January 2015 that the Department of Labor (DOL) will abandon the “appraiser-as-fiduciary” rule from its planned re-proposal of a broad set of rules affecting fiduciaries and prohibited transactions. This story goes back to 2010 when the DOL issued a proposed regulation that would impose a fiduciary obligation on business appraisers in …

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The DOL Comes Down Hard on ESOP Trustee

On June 2, 2014 the U.S. Department of Labor (DOL) reached a $5.25 million settlement with GreatBanc Trust Company (GreatBanc). It was alleged that GreatBanc, as trustee to the Sierra Aluminum Company Employee Stock Ownership Plan (ESOP), allowed the plan to purchase stock from Sierra Aluminum’s co-founders and top executives for more than fair market …

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Succession planning with an ESOP

There are many ways for a business owner to successfully plan for his/her exit.  A survey conducted by the Business Enterprise Institute, Inc. shows the break down by successor type as follows: The largest allocation of 41% is to key employee(s), a co-owner, or an employee stock ownership plan (ESOP). As of 2013 there are …

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8 Essential Elements of an Exit Strategy for Business Owners: Part I

At some point in time, every business owner will need to transition their business to new owners, which could be a business partner or management buy out, a transfer to family members or an outright sale of the business on the open market.  Regardless of the expected exit strategy, every business and business-owner should probably …

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What is an ESOP?

I started a new job as an accounting manager and my employer notified me that I will be eligible to participate in their Employee Stock Ownership Plan (“ESOP”) after one year of service. They also said the ESOP was leveraged. In addition to being eligible to participate in the ESOP, I was given the task …

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Pack Rat? Hoarder? Neat Freak? Record Retention Guidelines

If you are either quick to toss things, or are one who keeps things around until you run out of space, you might want to take a step back and reevaluate your system. While the “round file” may be the best place to immediately “file” junk mail and the like, when it comes to important …

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Is an ESOP Right for You?

An employee stock ownership plan (ESOP) is a qualified retirement plan that invests primarily in employer stock.  Let’s look at a few of the pros and cons of an ESOP. Pros Contributions to an ESOP are expenses for the contributing corporation for tax purposes. ESOP companies are less likely to be disposed of by sale, …

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Thinking About A Leveraged ESOP Transaction? Part II

With proper planning and execution, a leveraged ESOP can provide benefits to all parties of the transaction, including the company, the owners, the employees and lenders. The Company The most significant benefit for the company is the tax deduction for the contributions to the ESOP, which are essentially returned to the company and available to …

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