ESOP Super Champion, Senator Kelly Ayotte, Seeks Allies to Protect ESOPs; Sends Out Dear Colleague Letter on S. 1232

Senator Kelly Ayotte (R-NH)

Senator Kelly Ayotte (R-NH) has sent a Dear Colleague letter to her Senate colleagues seeking co-sponsors for her pro-ESOP bill, S. 1232 — “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.”

Senator Ayotte’s letter discusses how S. 1232 (S. 1232 was introduced June 20, 2011) would prohibit the Department of Labor (DOL) from moving forward with its proposed regulation on the definition of a fiduciary. Her letter goes on to state that the proposed regulation would not only hurt ESOPs already in place but would jeopardize the creation of new ESOPs, result in the purchase of additional insurance coverages, the need to employ specialized counsel to deal with the new regulation, and expose ESOP companies and fiduciaries to unnecessary litigation. Her letter goes on to say that not only is the proposed regulation a hindrance to a program that is providing retirement benefits to employees, the proposed regulation is also an unnecessary step as there are rules already in place to correct ERISA violations. From the letter, “S. 1232 prohibits the DOL from moving forward on this proposal by creating an explicit exemption for ESOP appraisals from ERISA’s stringent fiduciary requirements. It is a pro-small business solution and simply codifies what has been in practice for over 35 years.”

Current co-sponsors of S. 1232 include: Senator Roy Blunt (R-MO), Senator Scott Brown (R-MA), Senator Susan Collins (R-ME), Senator Mary Landrieu (D-LA), Senator Mitch McConnell (R-KY), and Senator Olympia Snowe (R-ME).

Additional information about S. 1232 can be found on the Association’s website here and here.

As the Association has mentioned in previous newsletters and on the Association’s blog, the DOL is not backing down on its ESOP stance (See page 5 of the June 2012 issue — Department of Labor’s ESOP Tune Isn’t Changing — for more information. The June issue is available in the members only section of the Association’s website.).

Senator Ayotte’s spokesperson indicated that the Senator feels the DOL is not listening to the ESOP companies’ protests about its proposal which at this time is on “hold” at the Department. Statements by DOL officials indicate no intent to alter its aforementioned proposal with regard to ESOPs.

“The DOL continues to state that ESOPs will be closely examined and incorrect valuations are of particular concern as officials in the DOL’s Employee Benefits Security Administration have repeatedly stated,” said ESOP Association President J. Michael Keeling. “We thank the Senator for taking the lead on this issue. The DOL needs 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. The ESOP community needs to ask Senators to join Senator Ayotte and her current co-sponsors.”

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