ESOP Blog

Infographic by National Center for Employee Ownership (NCEO) from What Is an ESOP?

In most cases, the trustee is the fiduciary, but the two functions are not necessarily the same. Plans must designate who the fiduciary is; they can designate this for all issues or have different fiduciaries for particular issues. A fiduciary is anyone who makes decisions about plan operations, including its management or the disposition of…

Courts have generally said no, but in the Department of Labor’s August 2003 lawsuit against Enron (the case was settled out of court), it asserted that the board and management did have fiduciary responsibility for Enron’s stock ownership plans because they appointed and had the right to change fiduciaries for the plans. In this case…

A fiduciary is anyone who makes decisions for the plan, causes someone to make a decision about the plan, or, in some cases, provides advice to someone making decisions about the plan. Put differently, it is anyone who exercises control over plan assets, directly or indirectly. Any person (or any group of people) can be…

Anyone can serve as a trustee, but it should be someone with the requisite knowledge and skills or someone who will acquire them. While a seller can be a trustee, it is not a good idea as courts and the DOL will regard it as a per se conflict of interest. Who selects the trustee?…

Can an independent trustee be designated for a particular issue? Yes. A reasonable compromise for many companies is to have an inside trustee or trust committee for normal operations but appoint an outside trustee for special circumstances that present strong conflicts of interest, such as an acquisition proposal. What are the arguments for having an…

A trustee is the person or institution that normally has the formal responsibility to make sure the plan is operated for “the exclusive benefit of plan participants.” Trustees can be “independent” or “directed.” An independent trustee makes decisions for the plan based on the trustee’s judgment, relying as needed on advice from qualified professionals; a…

Baby boomers have changed the face of the U.S. population for more than 70 years and continue to do so as more enter their senior years, a demographic shift often referred to as a “gray tsunami.” The 2020 Census will provide the most up-to-date count of the baby boom generation, now estimated at about 73…

Aside from cost issues, what can make ESOPs not feasible? Several factors need to be considered: Is payroll adequate? As explained in the section “ESOP Participation, Allocation, and Vesting Rules and Practices,” there are limits to the dollar amounts that can be contributed to an ESOP each year (generally 25% of pay). If this amount…