ESOP trustees are people or organizations that are charged with managing the employee stock ownership plan on behalf of the plan participants. The Employee Retirement Income Security Act of 1974 (ERISA) requires all ESOPs to have a trustee to manage the plan assets. These trustees can be internal to the organization with the ESOP but are more frequently external.
External ESOP trustees are often sought not only for their expertise, but also because they reduce the opportunity for conflicts of interest, or the appearance of them, to arise.
Types of ESOP Trustee Services
There are different types of ESOP trustee services. These include:
Ongoing ESOP Trustee
This type of trustee service is exactly what it sounds like. Trustees perform the ongoing, routine work necessary to manage the ESOP year after year. This includes meeting with fiduciary agents and ESOP managers or the board to monitor plan performance and operations, review financial operations and health of the plan, and conduct annual valuation of the stock.
ESOP Transaction Trustee
Transaction trustees help companies form new ESOPs, negotiating and making the fiduciary decisions necessary to acquire the stock from the sellers during purchase transactions. In addition to helping establish ESOPs, transaction trustees also manage ESOP terminations and the sale of stock to a third-party. Transaction trustees have a legal duty to act in the best interests of the plan participants and to ensure fair market value is paid for the stock in all transactions.
Successor Trustee Services
Successor trustees step in to take over from a predecessor. The predecessor may have been removed for a breach of duties, stopped providing trustee services, or perhaps the organization decided it was time to retain an external ESOP trustee to manage the plan.
Each of these external ESOP trustee services provides specific services and benefits to ESOP organizations which will be of use depending on the specific needs of the ESOP at the time. Learn more about the different types of ESOP trustee options here.
Top 3 Benefits Of Using An External ESOP Trustee
In addition to providing some distance between an organization’s operations and management and the management and oversight of the ESOP, there are at least three more benefits of ESOP trustee services.
- Specific Expertise – An external trustee has the time and ability to assess, understand, and comply with the ever-changing rules, standards, and processes that the Department of Labor enacts and is better equipped to comply with ERISA requirements. Providing ESOP trustee services is the sole business of Aegis Fiduciary, which means it is also our sole focus. Our team has the background, knowledge, and experience to meet any issue that may arise in regard to ESOP fiduciary obligations without distraction.
- Meets Outside Requirements – External trustees have the experience and qualifications to meet the “prudent expert standard” rule of ERISA. Under this rule, ERISA requires fiduciaries to act with the care, skill, prudence, and diligence that a “prudent man” acting in a like capacity and with familiarity of such matters would use. The “with familiarity” qualification is an important distinction that holds the expert, or trustee, to a higher professional standard than simple prudence.
- Resources and Capabilities – An external trustee has the resources and infrastructure system in place to maintain the plans, ensure compliance, and keep records. Accuracy in these areas is essential for the successful management of an ESOP and provides protection if there is ever a question about conflicts of interest, stock valuations, or the objectivity of the decisions made.
Learn More About Aegis’ External ESOP Trustee Services
The Aegis Fiduciary Services, LLC team has over 85 years of combined experience with ESOP fiduciary services. We would be happy to discuss our trustee services with you in more detail. Use our contact form to tell us about your needs and see if we are a fit for your company.
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