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Covering ESOPs and employee ownership

News: Justice Department Asks Supreme Court to Reverse Circuit Courts’ Pro-ESOP Position

ESOP Association News

The ESOP Association sent out the following press release. We are sharing with readers here.

For Immediate Release: November 14, 2013

Justice Department Asks Supreme Court to Reverse Circuit Courts’ Pro-ESOP Position

November 14, 2013 (Washington, DC) – In a disappointing turn of events, the Obama Administration has once again taken a negative position in regard to employee stock ownership plans (ESOPs).

Early in 2013, the Supreme Court asked the Solicitor General to comment on technical questions regarding stock-drop cases and to assess whether these types of cases should be brought to the attention of the Court. In a rather strange move, the Solicitor General asked the Court to focus only on a matter concerning ESOP plan fiduciaries, and whether they are entitled to the presumption that they have acted in the best interests of plan participants by investing in company stock.

“Congress, and former Presidents, has consistently encouraged ESOPs for over 30 years,” said ESOP Association President, J. Michael Keeling. “The presumption that ESOP plan fiduciaries act prudently when company stock is the ESOP’s primary asset was decided by the Third Circuit in Moench V. Robertson,  a 1995 case that plaintiffs won, making it clear bad actors do not prevail but also acknowledging Congress has endorsed ESOPs and Presidents have signed pro-ESOP laws. This pro-ESOP Moench position has been upheld by a majority of Federal courts for years, and one can only presume from the Solicitor General’s question of Moench that the Justice Department is looking to harm ESOPs.”

There is concern that if the Supreme Court agrees with the Administration, there will be a rise in lawsuits challenging ESOP companies. Numerous anti-ESOP lawsuits would do harm to ESOP companies and their employee owners.

“Since 2010, the ESOP community has been fighting a proposed regulation from the Department of Labor regarding the definition of an ESOP fiduciary. The Solicitor General’s attack on ESOPs is one more dig from an Administration that has demonstrated negative views of employee ownership as evidenced by its budget proposal justifying the reversal of a pro-ESOP tax law because, according to the Administration, employees working for companies with more than 10 – 15 employees are incapable of understanding how their actions impact their company. It’s counter-intuitive to hear the Administration preach about creating jobs and then try to take away a proven policy that sustains jobs,” stated Mr. Keeling.

For those that are curious, the Justice Department Brief: Brief

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The ESOP Association is the national trade association for companies with employee stock ownership plans (ESOPs) and the leading voice in America for employee ownership. The core cause of The ESOP Association is the belief that employee ownership will improve American competitiveness, increase productivity through greater employee participation, and strengthen our free enterprise economy. More information: website – www.esopassociation.org and blog – www.esopassociationblog.org.

Filed under: DOL Proposed Fiduciary Regulation, Government Affairs, Member Services, Retirement Issues, , ,

September 2013, Update on the DOL

ESOP Association President, J. Michael Keeling, provides members with an update on the Department of Labor’s proposed regulation on the definition of fiduciary.

For those interested, the letter from Congressman Rokita and Congressman Loebsack to the DOL that Mr. Keeling refers to in the video update is here: Letter to DOL September2013.

Filed under: DOL Proposed Fiduciary Regulation, Government Affairs, , , ,

August 2013 Round Up of Links

It’s the last day of the month before a holiday which means it’s time for a link up of this month’s stories. See below for your refresher.

Joining us in Vegas? Here’s what you need to know about the Conference.

The 2013 Press & Event Planning Kit for Employee Ownership Month has been released. Download your copy today.

The August 2013 ESOP Report is available on the Association’s website.

The Outside Board Registry is a great resource for members.

We tell you how to keep up with tax reform updates.

Publications highlight: ESOP Fiduciary Handbook.

A new special education track for in-house ESOP trustees will be offered to attendees of the Las Vegas Conference & Trade Show.

Watch the tax reform update for August.

Senators send letter to new DOL Secretary regarding proposed rule on the definition of a fiduciary.

Filed under: Conference Information, DOL Proposed Fiduciary Regulation, Employee Ownership Month (EOM), Government Affairs, Publication, , , , , , , ,

Senators Send Letter to New DOL Secretary Regarding Proposed Rule on the Definition of a Fiduciary

On July 25, 2013, Senators Mitch McConnell (R-KY), John Thune (R-SD), Kelly Ayotte (R-NH), and Roy Blunt (R-MO), sent a letter to the just confirmed new Labor Secretary, Thomas Perez, about the Department’s proposed regulation that would mandate all private ESOP company appraisers be ERISA fiduciaries.

In the letter, the Senators state:  “We cannot overstate the detrimental effect the 2010 proposed regulation would have on private ESOP companies that have a successful record of maintaining much needed jobs and providing generous retirement benefits for part-time, low-wage, and middle class workers. The Labor Department’s efforts to expand the definition of fiduciary to include independent ESOP appraisers will only hurt the very employees it seeks to protect.”

“We thank Senators McConnell, Thune, Ayotte, and Blunt for their strong support of ESOPs and for taking this step in emphasizing to the DOL just how harmful this proposed regulation is to the ESOP community,” said ESOP Association President, J. Michael Keeling. “These Senators are major leaders in the U.S. Senate — Senator McConnell, the Republican Leader; Senator Thune, Chair of the Senate Republican Conference; and Senator Blunt, Vice Chair of the Senate Republican Conference. And of course, Senator Ayotte, who first took up the ESOP cause protesting the DOL proposal, has now become a national figure in American politics.”

Click here to read the full letter – Letter to DOL.

Filed under: DOL Proposed Fiduciary Regulation, Government Affairs, , , , ,

July 2013 Re-Cap

It’s the 31st of July which means it’s time for the monthly link up.

Tax Reform Update from July 3rd – Senate Opens Process to Decide What Tax Benefits to Keep

Senator Kelly Ayotte Seeks Cosponsors for S. 273

Help Save ESOP Tax Law

ESOP Association member, C.S. Davidson, Inc. Honored with Well Workplace Award through the Lancaster County Business Group on Health

Center for American Progress Report Cites Need for More Inclusive Capitalism

ESOP Association President Participates in Senate Small Business Committee Tax Roundtable

July 2013 ESOP Report was released

AICPA Supports Bills to Block Change in DOL Fiduciary Rule for Appraisers of ESOPs

The ESOP Association Announced a New Issue Brief from the Advisory Committee on Valuation — White Paper on Valuing Synthetic Equity

Once Again: Save ESOPs

A reminder about the upcoming 2013 Employee Owner Retreat

Coalition to Protect Retirement Sends Letter to Senate Regarding Tax Reform; Retirement Savings Network Also Sends Letter

ESOP Association Member, Carl Warren & Company, Honored as 2013 ESOP Company of the Year

Filed under: Chapter News, Conference Information, DOL Proposed Fiduciary Regulation, Employee Ownership Foundation, Employee Ownership Message, Government Affairs, Issue Brief, Member Services, Publication, TEA Members, , ,

AICPA Supports Bills to Block Change in DOL Fiduciary Rule for Appraisers of ESOPs

We received the following email from the American Institute of CPAs (AICPA) earlier this week and wanted to share. From their website, the AICPA is the world’s largest member association representing the accounting profession, with nearly 386,000 members in 128 countries and a 125-year heritage of serving the public interest. The email follows:

The American Institute of CPAs wrote Congress on July 10 in support of legislation (S. 273 and H.R. 2041) that would block the U.S. Department of Labor’s (DOL) 2010 proposal to change its definition of fiduciary under the Employee Retirement Income Security Act of 1974 to include appraisers of employee stock ownership plans (ESOPs).  The AICPA has repeatedly argued that, rather than expand the definition, as proposed by DOL, rules should be implemented to ensure that only qualified individuals prepare valuations for benefit plans and that individuals follow recognized valuation standards.

The AICPA’s letter to Congress is below.

 

July 10, 2013

 

The Honorable Tom Harkin

Chairman, Health Education Labor and

Pensions Committee

United States Senate

Washington, DC  20510

 

The Honorable Lamar Alexander

Ranking Member, Health Education Labor and Pensions Committee United States Senate Washington, DC  20510

 

The Honorable John Kline

Chairman, Education and Workforce Committee United States House of Representatives

Washington, DC  20515

 

The Honorable George Miller

Ranking Member, Education and Workforce Committee United States House of Representatives Washington, DC  20515

 

RE: S. 273 and H.R. 2041

 

Dear Chairman Harkin, Ranking Member Alexander, Chairman Kline and Ranking Member Miller:

On behalf of the nearly 386,000 members of the American Institute of Certified Public Accountants (AICPA), I am writing to encourage you to cosponsor S. 273/H.R. 2041, a bill that would prohibit the Department of Labor (DOL) from moving forward on its re-proposal to expand the definition of a fiduciary under the Employee Retirement Income Security Act (ERISA) to include independent appraisers of Employee Stock Ownership Plans (ESOPs).

Many CPAs perform business valuation services for ESOPs by providing an independent, third-party objective appraisal of the stock of employer companies that sponsor ESOPs.  Many of these appraisals are also used for other purposes including satisfying the Internal Revenue Service (IRS) requirements related to the ESOP’s tax-exempt status.  The Internal Revenue Code (IRC) requires that ESOP valuations be obtained from an independent appraiser at least annually.  If the DOL were to redefine an ERISA fiduciary to include ESOP appraisers an inherent conflict would arise between the DOL and IRS requirements for ESOP appraisers.  An ERISA fiduciary must act solely in the interest of plan participants and their beneficiaries and therefore cannot provide an independent, third-party objective perspective.

The DOL has not demonstrated a need for such a broad and far-reaching change from more than 35 years of established policy.  The DOL proposal is a draconian response to a very small number of deficient ESOP appraisals. In testimony before Congress and responses to Congressional inquiries and private requests from the AICPA, the DOL has provided only a few cases of deficient appraisals over the past 20 years out of tens of thousands of ESOP appraisals performed annually.  Further, our analysis of the DOL cases involving CPAs found that in the vast majority of these cases the courts found the appraisers’ work to be satisfactory but that the plan trustee improperly used the work of the appraiser.

The DOL has announced plans to re-issue its previous 2010 proposal later this year.  The AICPA is concerned that the new proposal will essentially mirror the previous proposal and, if finalized, will unnecessarily subject all ESOP appraisers to an increased legal liability and require them to purchase expensive fiduciary liability insurance.  This would, in turn, increase the costs to all ESOP plans and reduce the amount available for participants and beneficiaries.

The DOL’s concerns with the quality of ESOP appraisals could be addressed with a far more targeted solution. Unlike other federal agencies including the IRS and Small Business Administration (SBA), the DOL, does not have any minimum requirements or standards for appraisers.  The AICPA and other stakeholders have suggested in comment letters and testimony that the DOL implement rules to ensure that only properly qualified individuals perform ESOP valuations and those individuals follow recognized valuation standards. Requiring ESOP appraisers to have specialized training, credentials, and to adhere to professional standards would protect participants and beneficiaries in a cost effective manner.  This approach would be consistent with the IRS and SBA rules for appraisals and thus avoid the potential for conflicting requirements across federal agencies.

The AICPA fully supports the goal of protecting the interests of plan participants and beneficiaries of employee benefit plans.  Ensuring the quality of sponsor company valuations is critical to making prudent decisions regarding plan investments.

Thank you for considering cosponsorship of S.273/H.R. 2041.  Please feel free to contact Diana Huntress Deem, Director, Congressional and Political Affairs Team at 202.434.9276 if you have any questions.

Sincerely,

Barry C. Melancon, CPA, CGMA

President and CEO

cc:

Members of the Senate Health Education Labor and Pensions Committee Members of the House Education and Workforce Committee

Filed under: DOL Proposed Fiduciary Regulation, News Links, , , ,

Senator Kelly Ayotte Seeks Cosponsors for S. 273

On February 11, 2013, Senator Kelly Ayotte (R-NH) introduced S. 273, a bill to modify the definition of fiduciary under the Employee Retirement Income Security Act of 1974 to exclude appraisers of employee stock ownership plans (ESOPs). This bill is a response to the Department of Labor’s (DOL) proposed anti-ESOP regulation mandating all private ESOP company appraisers be ERISA fiduciaries.

The bill is cosponsored by:

Senator Roy Blunt (R-MO)

Senator Susan M. Collins (R-ME)

Senator Amy Klobuchar (D-MN)

Senator Mary L. Landrieu (D-LA)

Senator Mitch McConnell (R-KY)

On June 27, 2013, Senator Ayotte sent the following Dear Colleague letter regarding S. 273 seeking cosponsors.

Ayotte Dear Colleague Ltr 1

Ayotte Dear Colleague Ltr 2You can also view the letter here: Dear Colleague Letter.

For additional information about S. 273, please see:

Senator Kelly Ayotte speaking to The ESOP Association’s New England Chapter’s Super Regional Board of Directors/Trustees Conference

Senator Kelly Ayotte Renews Work to Protect Employee Ownership: Introduces Pro-ESOP Bill, S. 273

Filed under: DOL Proposed Fiduciary Regulation, Employee Ownership Message, Government Affairs, Member Services, , , ,

June 2013 Wrap Up

We’re half way through 2013 which means a June re-cap.

We highlighted some Chapter and member news.

Publications Highlight: ESOP – The Concept.

FASB approved indefinite deferral for ESOPs.

A note about responsive design and The ESOP Association’s website.

Senator Kelly Ayotte spoke to New England Chapter members.

The June 2013 ESOP Report was published.

Rutgers University announced Fellowship winners.

Golden Artist Colors’ ESOP company president testified on the importance of employee ownership to the House Committee on Small Business.

The Employee Ownership Foundation’s 2013 Employee Owner Retreat.

Pigs? Make that capitalist pigs!

Filed under: Chapter News, DOL Proposed Fiduciary Regulation, Economic Performance, Employee Ownership Foundation, Employee Ownership Message, Government Affairs, Member Services, Publication, TEA Members, , ,

Senator Kelly Ayotte Speaks to New England ESOP Association Members

ESOP Association News

The following release was sent out by The ESOP Association today. We’re sharing here with readers.

For Immediate Release: June 17, 2013

Senator Kelly Ayotte Speaks to New England ESOP Association Members

June 17, 2013 (Washington, DC) – Speaking to a gathering of ESOP Association members, Senator Kelly Ayotte (R-NH) once more renewed her promise to protect ESOPs (employee stock ownership plans) and employee ownership in America. The Senator was also presented with the 2013 ESOP Advocate of the Year Award by The ESOP Association’s New England Chapter members. The Award was presented at the Chapter’s Super Regional Board of Directors/Trustee Conference held in Nashua, NH on June 14, 2013.

In February 2013, Senator Ayotte introduced pro-ESOP bill, S. 273, a bill to modify the definition of fiduciary under the Employee Retirement Income Security Act (ERISA) of 1974 to exclude appraisers of ESOPs. This bill is a response to the Department of Labor’s proposed anti-ESOP regulation mandating all private ESOP company appraisers be ERISA fiduciaries.

“The ESOP Association is proud to recognize Senator Kelly Ayotte as the New England Chapter’s 2013 ESOP Advocate of the Year. Senator Ayotte is a strong advocate for the ESOP cause, and the Association, along with New England Chapter members, is grateful for the commitment Senator Ayotte has shown in supporting employee-owned companies,” said ESOP Association President, J. Michael Keeling.

A video of the Senator’s remarks is below. Thanks to ESOP Association member, Chuck Coyne, ASA, Managing Director, Empire Valuation Consultants, LLC, in Hartford, CT for sharing the video link.

Filed under: DOL Proposed Fiduciary Regulation, Employee Ownership Message, Government Affairs, TEA Members, , , , ,

News: Pro-ESOP Bill Introduced in the House; Bill Aims to Protect ESOPs

ESOP Association News

The ESOP Association sent out the following press release this afternoon. We are sharing with readers here.

For Immediate Release: May 17, 2013

For More Information: Amy Gwiazdowski, 202/293-2971, amy AT esopassociation.org

Pro-ESOP Bill Introduced in the House; Bill Aims to Protect ESOPs 

May 17, 2013 (Washington, DC) – Congressmen Brett S. Guthrie (R-KY), David Loebsack (D-IA), and Congresswoman Lynn Jenkins (R-KS) introduced H.R. 2041, a bill to modify the definition of fiduciary under the Employee Retirement Income Security Act of 1974 to make clear appraisers of employee stock ownership plans (ESOPs) are not ERISA fiduciaries.

H.R. 2041 is the companion bill to S. 273 introduced by Senator Kelly Ayotte in February 2013. This bill is a response to the Department of Labor’s (DOL) proposed anti-ESOP regulation mandating all private ESOP company appraisers be ERISA fiduciaries.

While the original proposal was withdrawn, if any regulation was finalized to make appraisers ERISA fiduciaries, there would be extreme confusion over whether the appraiser or the trustee[s], and other current fiduciaries, make the decisions about acquisition of shares on behalf of average pay employees. More troubling, it would leave private ESOP companies open to lawsuits by aggressive class action trial lawyers. Leaders at the DOL say a new proposal will be issued sometime in 2013. It is expected DOL will not alter the proposed regulation’s mandate that all appraisers of ESOP stock be ERISA fiduciaries.

“The DOL needs to wake up to the fact that private company ESOPs have tremendous positive records of sustaining jobs as evidenced during the Great Recession. As we’ve said before, research proves that ESOPs, and companies with other forms of employee stock ownership, provide more sustainable employment. According to the 2010 General Social Survey, employee stock owned companies laid off employees at a rate of 2.6% in 2010, whereas the rate for conventionally-owned companies was 12.1%. Bottom-line, ESOP companies’ employees, in the aggregate, save Uncle Sam $7 for every dollar Uncle Sam spent promoting employee ownership,” stated ESOP Association President, J. Michael Keeling.

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The ESOP Association is the national trade association for companies with employee stock ownership plans (ESOPs) and the leading voice in America for employee ownership. The core cause of The ESOP Association is the belief that employee ownership will improve American competitiveness, increase productivity through greater employee participation, and strengthen our free enterprise economy. More information: website – www.esopassociation.org and blog – www.esopassociationblog.org.

Filed under: DOL Proposed Fiduciary Regulation, Government Affairs, , , ,

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