Be Respectful: But Be Respected as Well

The following article originally ran in the September 2011 issue of the ESOP Report, the newsletter of The ESOP Association, as the Washington Report column. Archived issues of the ESOP Report can be found in the members only section of the Association’s website.

The ESOP brand among members of Congress who have visited with ESOP companies, or have welcomed ESOP delegations to their Washington offices, is ESOP people are hard working, good Americans, who are civil — in other words, the ESOP brand is just the opposite of the screamers and the insulters.  [Why people think salt is more effective than a little bit of sugar is hard to understand.]

But, in the ESOP community’s fight against the negative ESOP proposal from the Department of Labor (DOL) to make all appraisers of private company ERISA fiduciaries, many ESOP advocates are disappointed with the answers they are receiving from offices of both Senators and members of the House of Representatives in response to their respectful requests that their representative stand up for the pro-ESOP position and against the DOL position.

A brief note of explanation is needed for those not following this campaign closely before setting out what needs to be done by those who are disappointed with the answers they are receiving from their elected Federal officials.

The October 22, 2010, DOL announced a proposal that would redefine who is an ERISA fiduciary, not just appraisers of ESOPs, but anyone who gives advice about where to invest 401(k) money, including what investments to offer, where to put the money the employee invests, and what the employees do with the money, and anyone who does a similar task for those who are setting up, or investing in an Individual Retirement Account, or IRA.

Of the three areas of retirement savings — ESOPs, 401(k)s, and IRAs — the number of ESOPs, and the amount of money in ESOPs, and the number of persons who work in the ESOP service provider arena, is very small compared to the number of persons participating in 401(k)s and IRAs, the amount of money in 401(k) and IRAs, and the number of persons who provide services to 401(k) and IRA participants.

While it took the financial advisor firms, the k plan service providers, the banks holding IRAs, stock brokerage firms with thousands and thousands of people working with clients with IRAs and/or k plans, much longer to wake up to the danger of the DOL proposal than it did the ESOP community — being smaller means often leaner and more nimble — once awake, the k and IRA world have much heavier advocacy power than the ESOP community.

Plus the arguments for stopping the DOL proposal with regard to who is a fiduciary to k plans and IRAs are in several respects very different from the arguments for stopping the DOL ESOP appraiser proposal.  [In some respects they are the same: lack of data supporting the proposed regulation, increase service provider fees, and blatant ignoring of what other Federal agencies, such as the IRS in the ESOP arena, and SEC in the banking/financial arena, do in this area even though there is a Presidential order that agencies coordinate their regulations.]

So what is the point of this column?

In brief, many ESOP advocates have reported to the national office they wrote, or visited, with their elected officials about the DOL proposal, and the response from those officials was about the k and IRA issues, not the ESOP issues.  Some responses are very strong noting the member of Congress is doing all s/he can to stop the bad DOL “k and IRA” proposal.  It is easy to see that the ESOP advocate receiving such a response wants to scream, “I wrote about ESOPs; not k and IRAs!”

Most ESOP advocates have in turn passed along their disappointment with a statement that “what do you expect” from these do nothing, know nothing, silly members of Congress we have these days.

Well, while the cable news that leans to the left says that about Republican members of Congress, and the cable news channel that leans to the right says the same about Democratic members of Congress, the fact is that getting disgusted will not win for the ESOP position.

So, we are adding to our advocacy kit a suggested “second” communication for the ESOP advocates to the member of Congress who has not understood what the ESOP advocate wrote about in the first instance — the ESOP message.

The second letter will be respectful, but will make it clear: an ESOP advocate with an ESOP company deserves to have her/his concerns respectfully considered.

[Candidly, a letter or message from a member of Congress missing the mark is all about bad staff work, but we have to be respectful of staff people as well.]

In other words, the ESOP brand of being civil and respectful will be honored always; but by gosh, what ESOPs do for employees and their companies, and their communities, needs to be respected.