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Employee Stock Ownership Plans (ESOPs)

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ESOPs: A Path to Bank Independence

May 10, 2017

Authors

Steven Schaffer

ESOPs: A Path to Bank Independence

May 10, 2017

by: Steven Schaffer

Originally posted on BankBryanCave.com.

Employee Stock Ownership Plans offer an opportunity for banks to offer an attractive employee benefit plan, but can also do so much more.  On the latest episode of The Bank Account, Jonathan and I are joined by Bryan Cave Partner, Steve Schaffer, to discuss the advantages to banks considering implementing an ESOP.

To hear the Bank Account Podcast, please visit here.

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The President’s Benefits Budget Proposals

March 2, 2016

Authors

Chris Rylands

The President’s Benefits Budget Proposals

March 2, 2016

by: Chris Rylands

ThinkstockPhotos-122516159A few weeks ago, the President released his proposed budget for the fiscal year 2017. As usual, it is dense. However, the President has suggested some changes to employee benefits that are worth noting. While they are unlikely to get too much traction in an election year, it is useful to keep them in mind as various bills wind their way through Congress to see what the President might support.

  • Auto-IRAs. Stop us if you’ve heard this one before. The proposal would require every employer with more than 10 employees that does not offer a retirement plan to automatically enroll workers in an IRA. No employer contribution would be required and, of course, individuals could choose not to contribute. (In case you’ve forgotten, we’ve seen this before.)
  • Tax Credits for Retirement Plans. Employers
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The Moench Presumption is Dead – Long Live the Dudenhoeffer Presumption

July 17, 2014

Authors

Brian Berglund and Jeffrey Russell

The Moench Presumption is Dead – Long Live the Dudenhoeffer Presumption

July 17, 2014

by: Brian Berglund and Jeffrey Russell

On June 25, 2014, a unanimous United States Supreme Court weighed in on the legal standards applicable in stock drop cases in Fifth Third Bancorp v. Dudenhoeffer.

Facts. Beginning in 2007, Fifth Third Bank began experiencing a large number of mishaps, most of them associated with borrowers not repaying their loans when due. As a result, Fifth Third’s stock price suffered the same phenomenon as that of virtually every other publicly traded financial institution in the world during the great recession: it dropped precipitously, falling 74% from July 2007 to September 2009. With the benefit of hindsight, plaintiffs brought a class action lawsuit against the fiduciaries of the Fifth Third 401(k) Plan, alleging that all of this should have been patently obvious based on public and nonpublic information allegedly possessed by the fiduciaries. The plaintiffs asserted that the fiduciaries should have taken one or more of

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Supreme Court Grants Cert in Dudenhoefer v. Fifth Third Bancorp To Weigh in on Application of Moench Presumption

December 17, 2013

Authors

benefitsbclp

Supreme Court Grants Cert in Dudenhoefer v. Fifth Third Bancorp To Weigh in on Application of Moench Presumption

December 17, 2013

by: benefitsbclp

  • On Friday, the Supreme Court granted certiorari in Dudenheofer v. Fifth Third Bankcorp. (U.S., No. 12-751, cert. granted 12/13/13).  This suit was initially filed by participants in Fifth Third Bancorp’s profit sharing plan in a typical “stock drop” case.  Plaintiffs alleged that plan fiduciaries continued to invest in and hold Fifth Third stock despite its decline in value in breach of their fiduciary duties, including their duty to prudently and loyally manage the plan’s investment in company securities.
  • Both the ESOP portion of Fifth Third’s 401(k) plan and its company matching account were required to invest “primarily” in Fifth Third stock, although participants could then redirect any matching contributions into other investment options outside of such stock.  Plan fiduciaries also incorporated by reference Fifth Third’s SEC filings into the summary plan description.  Plaintiffs claimed that such filings contained misstatements and omissions in breach of ERISA’s duty of loyalty.
  • The
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The ESOP as a Solution

August 2, 2013

Authors

Steven Schaffer and Chris Rylands

The ESOP as a Solution

August 2, 2013

by: Steven Schaffer and Chris Rylands

Employee Stock Ownership Plans (“ESOPs”) can be a good choice for the right company because they can generate liquidity for the owners in a tax-advantaged form, allow the owners to retain de facto, if not legal, control, and provide employee ownership and the resultant productivity and retentive benefits to the business.  Common uses of ESOPs include can have other uses as well, such as:

  • Allowing an owner to exit his or her business but provide an incentive to retain existing management (who may be unable to buy)
  • Allowing a shareholder to diversify his or her holdings through a partial (or total) sale to an ESOP;
  • Providing a vehicle to efficiently redeem unwanted shareholders;
  • Structuring management buy-outs;
  • Providing a buyer for an estate holding closely-held stock;
  • Closing out a private equity fund by selling a portfolio company to an ESOP; and
  • Selling a division to employees.

Using

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When the Government Speaks: DoL Enforcement Priorities

February 15, 2013

Authors

Chris Rylands and Lisa Van Fleet

When the Government Speaks: DoL Enforcement Priorities

February 15, 2013

by: Chris Rylands and Lisa Van Fleet

In this second post in our series of reflections from the recent Tax Exempt/Government Entities meeting with IRS and DoL officials, we’ll focus on the areas the DoL officials identified as enforcement priorities and some of the specific items they highlighted.

Health Plans.  As we previously posted, the DoL is starting to look at health plans and compliance with health care reform specifically.  They have also discovered that many plans lack what they consider to be a formal plan document.  They are starting to ask not just for proof of the plan document’s existence, but also proof of when it was adopted, going back to January 1, 2010.  Plan sponsors who have not adopted wrap plan documents for their health plans may want to consider implementing those soon.

ESOPs. ESOP enforcement continues to be a priority.  The officials stated that they believe appraisers are

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DoL Representative Sheds Light on Enforcement Priorities

February 1, 2013

Authors

benefitsbclp

DoL Representative Sheds Light on Enforcement Priorities

February 1, 2013

by: benefitsbclp

A representative from the Atlanta Regional Office for the Department of Labor recently spoke at an Atlanta Bar Association luncheon and provided some insight into the Employee Benefits Security Administration’s enforcement priorities and some other interesting facts:

  • With regard to the need for fiduciary training that we wrote about previously, the representative confirmed that investigators generally only require proof of training if the plan sponsor/administrator has agreed to receive training as part of a settlement agreement following an audit.  However, they generally will inquire as to whether the plan sponsor/administrator has had fiduciary training as part of a routine audit.
  • The representative also confirmed that EBSA has started to audit for health care reform compliance (at least for the provisions that are currently effective).
  • They are also looking at HIPAA compliance for both plan sponsors and service providers, and particularly HIPAA portability (e.g., creditable
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