Archives: Employee Stock Ownership Plans (ESOPs)

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The Quandary of Publicly-Traded Employer Stock in a 401(k) Plan

Offering employer stock in a 401(k) plan investment lineup can seem like a win-win situation. It can enable employees to become company owners—real, skin-in-the-game, participants in their employer’s economic future—through a simple deferral election. The U.S. Supreme Court has even recognized the value of employer stock funds, confirming that Congress sought to encourage their creation … Continue Reading

ESOP Trends in the Marketplace

Over the years, employee stock ownership plans (ESOP) have evolved in many ways. Currently, ESOP transactions began to resemble traditional M&A transactions including financial structures, warrants and market rate sub-debt. In a recent presentation at the NCEO Employee Ownership Conference, Allison Wilkerson discusses current marketplace trends in structuring ESOP transactions, including the importance of pre-transaction … Continue Reading

Upcoming Employee Benefits Innovators Roundtable Series!

McDermott will be holding its annual Employee Benefits Innovators Roundtable Series this month. The roundtables offer experienced benefits professionals an opportunity to discuss cutting-edge, topical employer-driven benefit programs with their peers and members of McDermott’s employee benefits team. We are meeting in four locations this year. Join us in one of the following cities: May … Continue Reading

Acquisition Strategies for ESOP Companies

ESOPs have long provided an exit strategy for owners of privately held businesses and a platform for management buyouts. Mergers and acquisition (M&A) advisors increasingly look to leverages ESOPs to accomplish both conventional stock and asset acquisitions. Once an ESOP company decides to pursue an acquisition opportunity, it will generally structure in one of three … Continue Reading

Maintaining Retirement Plan Documents after Revenue Procedure 2016-37

At the 2016 Joint Fall CLE Meeting on October 1, 2016, Andrew Liazos presented on “Maintaining Retirement Plan Documents after Revenue Procedure 2016-37.” As an employer sponsoring a retirement plan, you are required by law to keep your books and records available for review by the IRS. Having these records will also facilitate answering questions … Continue Reading

Advantages of Using ESOPs To Structure Acquisitions and Divestitures In An Uncertain Economy

M&A advisors are becoming increasingly familiar with leveraged ESOP transactions and are routinely considering the ESOP platform in structuring acquisitions and divestitures.  The first part of this article references the ways in which leveraged ESOPs have historically been used to provide a tax-advantaged exit strategy for privately held business owners. The article then discusses the … Continue Reading

View From McDermott: Fifth Circuit Focuses on Process in ESOP Valuations

Though the Supreme Court’s 2014 unanimous ruling in Fifth Third Bank v. Dudenhoeffer announced the Employee Retirement Income Security Act (ERISA) standards for stock valuation in the context of a large public employee stock ownership plan (ESOP), the vast majority of ESOPs are still grappling with valuation issues. ESOPs that hold stock of closely-held corporations—approximately … Continue Reading

Supreme Court Emphasizes Heightened Pleading Standard for Stock Drop Cases

On January 25, 2016, the Supreme Court of the United States issued a per curiam opinion in Amgen Inc. v. Harris, holding that the Amgen, Inc. employees who filed suit after the value of the employer stock in which they had invested dramatically decreased, failed to sufficiently plead a breach of fiduciary duty claim under … Continue Reading

IRS Announces Employee Benefit Plan Limits for 2016

The Internal Revenue Service (IRS) recently announced the cost-of-living adjustments to the applicable dollar limits for various employer-sponsored retirement and welfare plans for 2016. Although some of the dollar limits currently in effect for 2015 will change, the majority of the limits will remain unchanged for 2016. Read full article.… Continue Reading

Ruling on UK Executive’s Lawsuit Involving U.S.-Based Stock Option Plan

The English Court of Appeals ruled that UK court has jurisdiction over UK executive’s lawsuit involving a U.S.-based stock option plan, despite the stock option plan’s clear language requiring Massachusetts choice of law and jurisdiction. Multinational companies sponsoring broad-based employee plans should be on notice that non-EU exclusive jurisdiction clauses may not be enforceable against … Continue Reading

Recent Case Law Suggests Corporations Should Implement Limits on Director Equity Awards

Recent case law suggests that corporations should consider implementing limits on director equity awards similar to those implemented for executives. The current practice is to include director equity awards in stockholder approved “omnibus” stock plans that also cover executive officers and key employees. However, unlike for certain executives, there are no regulatory requirements regarding limits on directory … Continue Reading

The Directed Trustee in the Post-Dudenhoeffer World

Court cases challenging the actions of Employee Retirement Income Security Act fiduciaries have continued unabated since the scandal of Enron in 2002.  Since then, a large number of cases are in the “stock drop” area, which encompasses cases relating to employer securities investments when the stock price drops severely.  The litigation has focused on whether … Continue Reading

IRS Announces Employee Benefit Plan Limits for 2015

The Internal Revenue Service (IRS) recently announced the cost-of-living adjustments to the applicable dollar limits on various employer-sponsored retirement and welfare plans for 2015. Although many dollar limits currently in effect for 2014 will change, some limits will remain unchanged for 2015. Read the full article.… Continue Reading

Supreme Court Rejects “Presumption of Prudence,” Adopts New Pleading Standards in Fifth Third Bancorp v. Dudenhoeffer

In a highly anticipated decision, the Supreme Court recently ruled that ESOP fiduciaries are not entitled to a presumption of prudence under ERISA in connection with their decisions to buy, hold or sell the employer’s securities. While the elimination of this presumption is a loss for ESOP fiduciaries, the decision imposes additional burdens on plaintiffs … Continue Reading

Transaction Structures for Acquisitions by ESOP Companies

ESOPs have long provided an exit strategy for owners of privately held businesses and a platform for management buyouts.  Mergers and acquisition (M&A) advisors increasingly look to leveraged ESOPs to accomplish both conventional stock and asset acquisitions. Once an ESOP company decides to pursue an acquisition opportunity, it will generally structure in one of three … Continue Reading

Supreme Court Takes Case About Company Stock Funds and Presumption of Prudence

The Supreme Court of the United States granted certiorari in Fifth Third Bancorp v. Dudenhoeffer, suggesting that the Supreme Court will resolve the current division among U.S. circuit courts regarding the application of the “presumption of prudence” in employer stock cases. To read the full article, click here.… Continue Reading

Employee Benefits & Compensation: What You Should Do Before Year End

Friday, November 18, 2011 10:00 – 11:00 am CST As the year draws to a close, please join us for a focused and concise update on the most important employee benefit issues.  Mark your calendars McDermott Will & Emery will present a 60-minute complimentary webcast, hosted by the leaders of our employee benefits and compensation … Continue Reading

No Seventh Circuit Rehearing in Kraft ERISA “Excessive Fees” Case

by Chris C. Scheithauer and Joseph S. Adams As previously described in this blog earlier this year, a divided Seventh Circuit panel reversed summary judgment in favor of Kraft Foods Global, Inc. in a class action involving allegedly excessive fees in the Kraft 401(k) plan.  Shortly thereafter, Kraft petitioned for rehearing of the case by … Continue Reading
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