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| Best Practices for Other Retirement Plans When You Have an ESOP | |
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December 9, 2009 No time or budget to travel to a seminar? BREA allows you to attend a free conference from your desktop! Our Webinars are PowerPoint presentations given by industry experts that are broadcast live over the Internet and accompanied by a telephone conference call. You can view the seminar slides on your computer while listening and interacting with the live presenters. Complete login information will be provided upon registration. About This Meeting Most ESOP companies have at least one other retirement plan, often a 401(k) plan. Good design can make these plans work well together, including making discrimination testing easier, encouraging adequate diversification, and providing employees with an exceptionally strong retirement package. This presentation will look at the opportunities and the challenges of other plans in an ESOP environment.
December 9, 2009 Jim Griffin has been working with the owners of closely held businesses and their families for over 19 years, focusing on business succession, estate planning and retirement plan design. He is a Certified Financial Planner® and a Chartered Retirement Plan Specialist® . He is part of an experienced wealth management team working with business owners on the structure and sale of their privately held business to an Employee Stock Ownership Plan (ESOP). Through a consultative approach, the team focuses on creating liquidity and diversification for owners while enhancing the solutions available to the company and employees. The team has experience with IRC § 1042 tax deferral, family wealth management, 401(k) plan investments, ESOP cash and investment management for fiduciaries and trustees, and ESOP repurchase liability funding strategies. He has setup and serviced all types of Qualified and Non Qualified Retirement plans. Including 401k, 403b, 457, Profit Sharing, ESOP.s, Defined Benefit, Cash Balance, Stock Appreciation and Phantom Stock programs. He is a member of the National ESOP Association, the National Center for Employee Ownership, the Financial Planning Association and the Western Pension & Benefits Conference. He is a frequent speaker on the topics of business succession, retirement, estate planning and employee ownership to industry and professional groups, including the NCEO/Beyster Institute.s National Conference at the Rady Business School at U.C. San Diego, the National ESOP Association, and the National Center for Employee Ownership. |
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| ESOP Companies Outperform Stock Market in 2008 | |
In Survey, 88.5% of ESOP Association Members Report Better Performance Than Stock Market WASHINGTON, Aug. 17 /PRNewswire-USNewswire/ -- Results from the Employee Ownership Foundation's 18th Annual ESOP Economic Performance Survey show that 88.5% of ESOP companies outperformed the stock market in 2008. The results indicate respondents' companies outperformed three major stock indices in 2008 including the Dow Jones Industrial Average, the NASDAQ Composite, and the S&P 500. As has been the case in all 18 years the survey has been conducted, a very large majority, 88.2% of survey respondents reported that creating employee ownership through an ESOP (employee stock ownership plan) was a "good business decision that has helped the company." In addition, 65% indicated the ESOP positively affected the overall productivity of the employees. In terms of profitability, the number is down from 2008 with 50.4% of respondents stating profitability increased in 2008. In terms of revenue, 57.9% reported an increase over the prior year. A new question was added to the survey in 2009 asking ESOP companies to report whether profits/revenue were down in the final quarter compared to the first quarter of the year. Approximately 63% reported that profits/revenue were down significantly/moderately, with 12.2% reporting the last quarter remained the same as the first. In addition, 13.3% reported that revenue improved in the last quarter and 10.2% reported that profit improved in the same time frame. "In a turbulent year, these results speak wonders for the power of employee ownership," said J. Michael Keeling, president of the Employee Ownership Foundation. "On the other hand, this survey and most news reports show that American companies are hurting, profits are down, and layoffs are taking place across the country. Objective academic research evidences that employee owned companies are higher performing, have high employee retention rates, and have employees that are more motivated and productive. Our national leaders need to promote policies to encourage more companies to become employee owned through an ESOP to create a more fair and equitable society." In addition, the survey asked companies to indicate their performance in 2008 relative to 2007:
The 2009 Economic Performance Survey was distributed to The ESOP Association's over 1,400 members in May 2009. The results are based on 429 responses, a 31% response rate. For additional information about the survey, please visit the Employee Ownership Foundation's website at www.employeeownershipfoundation.org or The ESOP Association's website at www.esopassociation.org. |
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| Charles Edmunson Scholarships | |
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Dear ESOP Association Members, We have just mailed the documents and application describing the Charles R Edmunson scholarships for 2009 to our corporate membership. Janet Edmunson, chair of the scholarship committee, is requesting your assistance in promoting the availability of the scholarships to your ESOP Association clients. While it takes a little work for the companies to complete the application forms, the benefit of winning a $1,250 scholarship could help keep ESOP excitement alive in their companies. And in these difficult economic times, scholarships could be the only way some of these companies can afford to send their enthusiastic employees to an ESOP conference or retreat. Thank you in advance for your help in making this scholarship program successful. http://www.magnetmail.net/images/clients/ESOPA/attach/2009Edmunsonappl.doc http://www.magnetmail.net/images/clients/ESOPA/attach/2009EdmunsonTerms.doc http://www.magnetmail.net/images/clients/ESOPA/attach/2009Edmunsoncvrltr.doc |
| Plan Governance™ Module of ESOPConnection: Making Life as a Fiduciary Easier | |||||||||||||||||||||||||||||||||||
The Plan Governance™ module of our online tool, ESOPConnection™, will facilitate your ESOP’s compliance with applicable ERISA fiduciary and documentation requirements. Please let us help keep your plan governance “house” in order. Contact us at 434.979.5500 x66 or x64 to discuss. The related topic of corporate governance deals with the duties and interactions of the company’s Board of Directors, officers, and shareholders. Your Board of Directors has responsibility under corporate law to the company’s shareholders (1) to monitor the officers the Board appoints to operate the company and (2) to document its review of these officers and the company's operations with Board meeting minutes, resolutions, and exhibits. A similar governance process applies to your ESOP fiduciaries who have responsibility under ERISA to act solely in the interests of plan participants. Like the corporate governance process, the plan governance process must be performed on an ongoing basis with corresponding actions that are both well considered (i.e., prudent) and well documented. The resulting historical record you create for your ESOP provides the basis for subsequently explaining your actions to your plan auditors, IRS or DOL examiners, and any participants raising claim issues under the plan. A detailed record also will limit questions from skeptical auditors/examiners and enhance credibility for your responses. Plan governance and corporate governance overlap to some extent in an ESOP company because the ESOP is a special type of retirement plan: one where trust assets can consist solely of stock in your company. Since the trust has company stock, ERISA holds transactions between the employer and the trust to a high standard of scrutiny. Proper documentation is necessary to demonstrate that these transactions comply with all ERISA requirements. This documentation is necessary even if your ESOP is not a majority shareholder of the company. It is not uncommon for ESOP company executives to wear several “hats.” A senior executive could be a company officer, a shareholder, a Board member, an ESOP participant, and also a member of the ESOP committee serving as plan administrator and/or trustee. The executive must be aware of which hat is being worn and to whom his or her duty of loyalty extends when making a decision that could impact the ESOP. In light of these potential conflicts of interest, it follows that good plan governance requires good corporate governance. This means, for example, that a majority ESOP trustee should insist that the Board follow best practices by hiring qualified outside Board members and establishing the necessary Board committees to provide oversight (e.g., audit, compensation). The Board, in turn, should provide the ESOP trustee with the necessary information on company actions so the trustee can effectively protect participants’ interests. ESOP plan governance is complex but you are not expected to be an ESOP expert. Nor does ERISA require that all your decisions be correct or perfect. However, ERISA does expect you to make well-reasoned determinations on the facts then available and to engage qualified experts, as needed, to help you make these decisions. To further support your decision-making process, your documentation should contain (or at a minimum at least refer to) (1) the specific recommendations made by your outside experts, and (2) your evaluation of these recommendations. |
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| “Best Practices of Corporate Governance for an ESOP Company” Webcast invitation: Thursday, August 16, 2007—11am EST |
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Over the last few years, the Department of Labor and certain employees of ESOP companies have been successful in bringing claims against board members, ESOP fiduciaries, and ESOP trustees where there has been a break down in corporate governance or ESOP Plan Governance™. Based on the current state of the law, the courts and government agencies view an ESOP company as a “quasi-public type of entity” since the employees own equity with the right to diversify their investment until they become eligible for a distribution under the ESOP. With this perspective, it is imperative that an ESOP company adopt reasonable corporate and plan governance policies that the company can actually follow. |
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| Now is the time to document for AACE! | |||||||||||||||||||||||||||||||||||
We all know that TEA sponsors a competition known as AACE for companies who communicate their ESOPs to their respective employee owners. Yet many companies never really focus on the AACE competition until it is time to send in their entries. The fact is that NOW is when you should be documenting your communications program and planning your AACE entry for the 2008 judging. The deadline will be around the first of March 2008, but the work should begin now. Start documenting everything you do to communicate the ESOP. Get a little crazy with your camera—photos always help to “dress up” and clarify an entry. Visit the AACE section of the TEA web site and begin deciding how you want to showcase your program. Read the brochure from the 2007 AACE, always being mindful that there may be minor changes in the program and/or the deadlines. The 2008 brochure will be posted early in January of 2008. Although you won’t actually be sending anything in to the competition until the end of February 2008, your AACE benefits can begin NOW as you document and evaluate the components of your future entry. Don’t delay. Begin the road now that can take you to the winners’ spotlight! All the information about the AACE competition is shown on the TEA web site, including past winners with photos and contact information. If you have specific questions not answered there, please feel free to call Pat Barnes, AACE Program Manager, at (304) 274-2517. |
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| Senator Blanche Lincoln Introduces S.1322 The ESOP Promotion & Improvement Act of 2007 | |||||||||||||||||||||||||||||||||||
The ESOP Association reports that Senator Blanche Lincoln [D-AR], member of the Senate Finance Committee, has introduced on May 7, 2007, S. 1322, the ESOP Promotion and Improvement Act of 2007. The bill is similar to the proposed ESOP Promotion and Improvement Act of 2005. |
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| ESOPConnection: A Timely Tool for 2007 and Beyond | |||||||||||||||||||||||||||||||||||
The Pension Protection Act of 2006 (PPA) requires that plan sponsors provide participants and beneficiaries with periodic benefit statements. On December 20th, the Department of Labor (DOL) issued Field Assistance Bulletin (FAB) 2006-03, providing general guidance concerning good-faith compliance with the new benefit statement requirements under the PPA. This FAB indicates that where participants have continuous access to benefit statement information through one or more secure websites (such as via our online tool, ESOPConnection™, such availability will be viewed as good-faith compliance with the requirement to furnish benefit statements. Participants must be given notification that explains the availability of statement information, how statements may be accessed, and their right to request and obtain a paper statement free of charge. This notice, which may be sent electronically, must be provided in advance of the date on which the first plan benefit statement would be required, and annually thereafter. ESOPConnection handles this notification automatically. In addition, the Internal Revenue Service (IRS) published final regulations last October on the use of electronic media which set forth the "exclusive rules" for providing written notices and making elections and consents pursuant to certain retirement plans and employee benefit arrangements. The issuance of these final regulations are worth noting as more plan sponsors have decided to use electronic media to meet the plan's additional reporting and disclosure obligations as added by the PPA. These regulations are effective for plan notices and consents provided on or after January 1, 2007. The IRS continues the two methods for electronic delivery of notices
and electronic receipt of participant and beneficiary consents as
outlined in the 2005 proposed regulations. The second or alternative method provides an exemption to the consumer consent requirements mentioned above. This alternate method is based on the 2000 regulations published by the IRS with respect to notices regarding distributions from retirement plans. Under the first method, the IRS has clarified that the record retention provision of E-SIGN is applicable under these final rules. This means that any electronic medium used to provide notices or to obtain consent required to be in writing must be retained in a way that can be reproduced for later reference. ESOPConnection, which can deliver notices electronically, is an E-SIGN compliant technology that can retain and reproduce a copy of the notice or the election. |
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| Required IRS Determination Letter | |||||||||||||||||||||||||||||||||||
Initiative starting in 2006 requiring each individually designed qualified retirement plan to be filed with the IRS every five years for a new determination letter. To review your needs, please contact: Tracy Holzman |
