If you have been reading my blog for the past few weeks you may have noted that I have spent quite a bit of time talking about the benefits of an ESOP. This post is going to look at how an ESOP is formed.
ESOPs are unique. Each is designed around the needs of the seller, the company, and the employees. There are some commonalities however. Let’s look at a simple leveraged ESOP transaction (a leveraged transaction is one where external financing is obtained).
They say a picture is worth a thousand words. The following graphic can help explain the workings of the ESOP transaction. Read more
I think it’s a safe bet to say we’ve all paid a lot more attention to retirement plan fees in the wake of the new DOL (Department of Labor) disclosure requirements. This is true for 401(k)/403(b) plans and beyond. Fortunately (or unfortunately) we can’t avoid the topic!
It’s likely no one pays more attention than the plan fiduciary. After all—it’s their job to work with the service provider and financial professional to make sure the fees paid by the plan are “reasonable.” But what exactly does “reasonable” mean? Read more
Aesop (pronounced ee-sop), the famous Greek story teller, had no knowledge of Employee Stock Ownership Plans (ESOPs). In all fairness, it would be surprising if he did as they were not recognized until the Employee Retirement Income Security Act of 1974 was passed – almost 2,500 years after his death.
Why would Aesop support ESOPs?
I reviewed some of his quotations and it leads me to believe that he may be a supporter of such plans. ESOPs address several issues that seemingly parallel quotes he had noted among his contemporaries in ancient Greece that still exist today.
It is thrifty to prepare today for the wants of tomorrow. – Aesop
Are most employee’s planning for their financial future?
Let’s look at some facts. According to the first quarter 2012 Principal Financial Well-Being Index, 67 percent of employees are very concerned about their long term financial future, but only 35 percent of employees indicate that they are saving enough money to live comfortably in retirement. Read more
Our annual ESOP client meeting was held last Wednesday, November 7th prior to the start of The ESOP Association Conference and Trade Show. More importantly, it was held a mere 16 hours after the election polls closed on the west coast. As you might expect, the election, and its aftermaths, took center stage.
It was evident from the participant’s comments that elections have consequences. Whether you are red or blue, have an R or a D as your party affiliation, the results matter. And what the election results mean is certainly less than clear. What is clear, healthcare, regulation, and tax policy are major concerns to companies with Employee Stock Ownership Plans (ESOPs).
As with most other businesses, the attendees are struggling to quantify the impacts of the Affordable Care Act. Last summer’s U.S. Supreme Court Ruling clarified many questions but others remain elusive prior to the rapidly approaching January 1, 2014 implementation date for many major provisions. Read more
Welcome to my blog! I look forward to posting (and interacting) regularly with you about issues affecting pension plans in the tax exempt sector.
To kick off my first post, I thought it would be timely to address some industry buzz.
Rumor has it that the DOL (Department of Labor) recently hired a lot of new field auditors, which could only mean one thing – more audits. I think it’s safe to say that more 403(b) plans will be put on the firing line as well. Just what we need, right? Well, a little work now and some knowledge may help, so keep reading.
When most people hear Employee Stock Ownership Plan (ESOP) they think exit planning (or maybe nothing at all). That’s not surprising given that historically ESOPs have been positioned as a succession planning approach.
Here’s an example, a key partner at a manufacturing company wants to retire, but the remaining partners can’t afford, or don’t want to buy him or her out. An ESOP could be used by the remaining partners to fund the buyout of the partner that’s leaving in order to avoid divesting the company.
However, to think of ESOPs as only a tool for exit planning sells them short. Let’s broaden our perspective for a second. Read more
As the writer of a blog about employee stock ownership plans (ESOPs) I want to believe that everyone is interested in the topic. But I know that isn’t true.
For example, the Galapagos giant tortoises (Chelonoidis nigra) aren’t interested in the plans. Even if they owned businesses (which I realize that they don’t), they wouldn’t likely be very interested in ESOPs for several reasons. They: Read more