The ESOP Association Blog

Covering ESOPs and employee ownership

May 17, 2013 • 4:00 pm 0

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While the original proposal was withdrawn, if any regulation was finalized to make appraisers ERISA fiduciaries, there would be extreme confusion over whether the appraiser or the trustee[s], and other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, , , ,

May 7, 2013 • 10:00 am 0

36th Annual Conference – Legislative Information

If you’re attending the Association’s 36th Annual Conference this week in Washington, DC, and will be meeting with your member of Congress, below are a few highlights on recent pro-ESOP legislation and information concerning a negative ESOP proposal in the President’s 2014 FY Budget.

You can find additional information in the Lobbying Kit which will be available at the Conference and in the 2013 Spring Advocacy Kit which is available on the website.

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

Press release here.

On February 13, 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).

Co-Sponsors

Senator Roy Blunt, R-MO

Senator Amy Klobuchar, D-MN

Senator Mary L. Landrieu, D-LA

Senator Mitch McConnell, R-KY

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 in July 2013. It is expected DOL will not alter the proposed regulation’s mandate that all appraisers of ESOP stock be ERISA fiduciaries.

Pro-ESOP Bill Introduced in Senate, S. 742

Press release here.

The ESOP Association expresses strong support for S.742, the Promotion and Expansion of Private Employee Ownership Act of 2013, introduced April 17, 2013 by Senator Ben Cardin (D-MD) and co-sponsored by a bi-partisan group of Senators. Co-sponsors include:

Original Co-Sponsors

Senator Ben Cardin (D-MD)

Senator Roy Blunt (R-MO)

Senator Amy Klobuchar (D-MN)

Senator Mary Landrieu (D-LA)

Senator Pat Roberts (R-KS)

Senator Debbie Stabenow (D-MI)

Senator John Thune (R-SD)

Joined as Co-Sponsors as of April 23

Senator Mike Crapo (R-ID)

Senator Sherrod Brown (D- OH)

S. 742 would amend the Internal Revenue Code of 1986 and the Small Business Act to expand the availability of employee stock ownership plans (ESOPs) in S corporations and expand opportunities for existing S ESOP corporations.

The ESOP Association Disappointed with ESOP Proposal in President Obama’s Budget

Press release here.  Additional information here and here.

Today, The ESOP Association expressed disappointment over a provision in the President’s Fiscal Year 2014 budget that pertains to employee stock ownership plans (ESOPs). Included in the budget document is a provision to eliminate Internal Revenue Code section 404(k). This incentive for ESOP creation and operation permits a C corporation to deduct the value of dividends paid on ESOP stock passed through to employees in cash, deductions used to pay the ESOP acquisition loan, or when the employee reinvests in more company stock in his/her ESOP account balance.

“This is a major proposal to reduce an incentive to create and operate an ESOP; we are disappointed it has been included in the President’s budget,” said ESOP Association President, J. Michael Keeling. “It is counter-intuitive to eliminate an incentive for a policy that resulted in fewer layoffs during the Great Recession. 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%.  It’s baffling to hear the Administration preach about creating jobs and then take away a proven policy that sustains jobs.”

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

February 28, 2013 • 11:41 am 2

February 2013 Links Roundup

Since today is that last day of the month, we thought we’d re-cap February.

New Jersey Assemblyman introduces ESOP bill

AACE Awards 2013 deadline reminder (Hint: It’s March 1st)

Senator Kelly Ayotte of New Hampshire introduced pro-ESOP bill, S. 273, a bill to modify the definition of fiduciary under the Employee Retirement Income Security Act of 1974 to exclude appraisers of ESOPs

The February 2013 ESOP Report was published

The ESOP Association signed a joint letter to FASB

A guest post from ESOP Association member, C.S. Davidson

If you want the ESOP Report by email, you’ll find more information here

We announced the deadline for the 2013 Edmunson Scholarships

Filed under: AACE - Annual Awards for Communications Excellence, DOL Proposed Fiduciary Regulation, Employee Ownership Foundation, Government Affairs, TEA Members, , , , ,

February 13, 2013 • 9:44 am 1

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

The following press release was sent out by The ESOP Association on Wednesday, February 13, 2013. We wanted to share the information with readers.

For Immediate Release: February 13, 2013

For More Information: Amy Gwiazdowski, amy AT esopassociation.org

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

February 13, 2013 (Washington, DC) – 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). The bill is co-sponsored by Senators Roy Blunt (R-MO), Mary L. Landrieu (D-LA), and Mitch McConnell (R-KY).

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 in July 2013. It is expected DOL will not alter the proposed regulation’s mandate that all appraisers of ESOP stock be ERISA fiduciaries.

“We’re very pleased to see Senator Ayotte not back down from protecting the best jobs policy, and the best deficit reduction policy, in Federal law,” said ESOP Association President, J. Michael Keeling. “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. According to the General Social Survey of 2010, employer stock owned companies laid off employees at a rate of less than 3% whereas conventionally-owned companies laid off employees at a rate of more than 12% during the Great Recession. Bottom-line, ESOP companies’ employees, in the aggregate, were saving Uncle Sam $7 for every dollar Uncle Sam spent promoting employee ownership.”

###

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, Economic Performance, Government Affairs, , , ,

February 4, 2013 • 10:44 am 0

January 2013 Review

In case you missed a day in January, here’s a quick re-cap.

Do you know the ESOP advocates?

Information on the ESOP Fiduciary Handbook

ESOP Association members made Fortune’s 2013 Best Companies to Work For list

Events to add to your calendar

Foundation news: Rutgers Mid-Year Fellows Symposium

January 2013 ESOP Report was published

American Bar Association Section on Tax sent a letter to the DOL on the definition of a fiduciary

New research shows that ESOPs save the federal government billions

The Employee Ownership Month Poster Contest is now accepting submissions

Emerging Scholar Awards information

AACE Awards opened for entries

Filed under: AACE - Annual Awards for Communications Excellence, Conference Information, DOL Proposed Fiduciary Regulation, Economic Performance, Employee Ownership Message, Employee Ownership Month (EOM), Government Affairs, News Links, Publication, TEA Members,

January 17, 2013 • 12:47 pm 0

American Bar Association Section on Taxation Sends Letter to DOL on Definition of a Fiduciary

The American Bar Association Section on Taxation sent a letter in December 2012 to Assistant Secretary of Labor, the Honorable Phyllis C. Borzi, discussing the DOL’s proposed regulation on the definition of a fiduciary. The letter makes a number of recommendations to the proposed regulation including information on valuation which would impact ESOP companies. The recommendation states: “We recommend that Final Regulations provide that a person who provides advice, or an appraisal or fairness opinion, concerning the value of securities or other property (“Valuation Information”), including with regard to employer securities, without providing any advice regarding whether to consummate a proposed transaction, even where rendered in connection with an acquisition or disposition of such property (e.g., by an ESOP) will not be a fiduciary.” (Information found on page 3 of letter.)

“While the DOL continues to pursue the proposed regulation on the definition of a fiduciary, comments such as this one from the American Bar Association filter in opposing the regulation and pointing out flaws in the DOL’s thinking. One has to wonder why the DOL is being so persistent in pushing this regulation,” said ESOP Association President, J. Michael Keeling.

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

September 5, 2012 • 1:17 pm 0

August 2012 Wrap-Up

With Labor Day come and gone, we thought we’d take a look back at August.

We highlighted the Leading in an Ownership Setting Program which is co-sponsored by the Employee Ownership Foundation and offered by the University of Pennsylvania

The 2012 Press & Event Planning Kit is now available

New S ESOP study talks about employment in ESOP companies

The President of The ESOP Association vlogged about the Republican Vice Presidential Choice, Paul Ryan

Virginia Senate candidate endorsed ESOPs

We highlighted some communications publications

The Association’s Outside Board Registry was spotlighted

The August 2012 ESOP Report newsletter is available for download

The GOP Platform endorsed ESOPs

Filed under: DOL Proposed Fiduciary Regulation, Economic Performance, Employee Ownership Foundation, Employee Ownership Message, Employee Ownership Month (EOM), Government Affairs, Member Services, Publication,

September 4, 2012 • 10:37 am 2

The American Institute of CPAs (AICPA) Seeks Support for S. 1232

S. 1232, introduced by Senator Kelly Ayotte (R-NH) in June 2011, is 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. 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.  If the proposed regulation were to be finalized as is, there would be extreme confusion over whether the appraiser or the trustee[s] and other current fiduciaries make the decisions about acquisition of shares, and most troubling, would leave private ESOP companies open to lawsuits. More information can be found here.

On August, 9, 2012, the President and CEO of AICPA, Barry C. Melancan, CPA, CGMA, wrote to Senators Tom Harkin and Mike Enzi to ask for their support of S. 1232. Senator Harkin is Chair of the Senate Committee on Health, Education, Labor and Pensions and Senator Enzi a Ranking Member. The letter states:

“…the DOL’s 2010 proposed definition of fiduciary, which would contradict more than 35 years of accepted practice, will not solve the agency’s quality concerns regarding a limited number of ESOP appraisals. Rather, it takes a one-size-fits-all approach to correct an admittedly small potential problem which would benefit from a far more specific solution.”

“We have said it over and over again, but the DOL does not want to listen. The officials at DOL need to wake up to the fact that private company ESOPs have tremendous positive records of creating jobs that are locally controlled in high performing companies.  ESOPs are good for employees, companies, and our communities,” said ESOP Association President J. Michael Keeling. “While a new version of the regulation has not been proposed yet in 2012, the DOL continues to state that ESOPs will be closely examined and incorrect valuations are of particular concern. DOL officials refuse to listen and we have heard they have no intent to alter their views toward ESOPs. We thank the AICPA for their support of S. 1232 and ask members of The ESOP Association to reach out to their Senators and ask for their support of this bill.”

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

August 1, 2012 • 1:46 pm 0

July 2012 Wrap-Up

Miss a post in July? Take a look below.

We talked about the ESOPs & YouTube library.

Employee ownership researcher, Dr. Joseph Blasi, talked about new employee ownership research.

We shared tips for winning an AACE Award.

We re-capped some Congressional visits.

And shared more Congressional visit pics.

Senator Ayotte’s pro-ESOP bill, S. 1232, needs co-sponsors.

An employee ownership summit was held in London.

Senator Sanders introduced pro-ESOP legislation.

The DOL had some choice words about ESOPs.

We remembered an unsung hero of the ESOP movement.

Filed under: AACE - Annual Awards for Communications Excellence, Conference Information, DOL Proposed Fiduciary Regulation, Economic Performance, Employee Ownership Message, Government Affairs, News Links, TEA Members,

July 27, 2012 • 1:12 pm 0

Does the current DOL care what Congress thinks about ESOPs? Apparently not.

On July 26, 2012, Mabel Capolongo, Director of Enforcement for the Department of Labor’s (DOL) Employee Benefits Security Administration, blasted ESOPs because retiring shareholders were selling their stock to the ESOP!

Duh. This is precisely what Congress has endorsed and encouraged since 1984 — to have exiting shareholders of private companies transfer ownership of productive assets to average pay employees in a leveraged ESOP transaction. (Prime example: Internal Revenue Code Section 1042.)

For example, Congress, right or wrong, eliminated some incentives between 1986-1995 that encouraged large, publicly traded companies to establish ESOPs, but the Congress and six former Presidents have consistently affirmed special laws to encourage the creation and operation of ESOPs in private companies, including a major expansion of ESOPs by enacting law in 1998 encouraging ESOPs in S corporations.

Today, it is estimated that 95% of ESOPs created and operating were formed because an existing shareholder sold shares to an ESOP, when it became time for him/her to leave from the company, usually because of age.

It seems DOL wants the existing shareholder not to help create broadened ownership but to liquidate his/her business, or sell it to a private equity firm, or a competitor, resulting in lost jobs!

Meanwhile, there is 35 years worth of overwhelming evidence that private ESOP companies are more productive, more profitable, and more sustainable, providing locally-controlled jobs, compared to similar private companies not employee owned.

Evidence is also clear that during the Great Recession employee stock owned companies laid off employee at a rate of less than 3% while traditionally owned companies laid off employees at a rate greater than 12%.

“The ESOP community wants to work cooperatively with regulators at DOL but having a top DOL official express alarm that exiting shareholders of private companies are selling the stock to an ESOP makes cooperation hard. The expression of dismay by Ms. Capolongo about exiting shareholders selling stock to ESOPs to the benefit of the employees, the company, and American communities demonstrates the Department has no regard for laws encouraging ESOP creation and operation,” said ESOP Association President J. Michael Keeling.

If you would like to read additional comments about the DOL’s enforcement project, read the Jul 27, 2012 issue of the BNA’s Daily Tax Report. The article can be found on page G-6.

Filed under: DOL Proposed Fiduciary Regulation, Economic Performance, Employee Ownership Message, Government Affairs, , , ,

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