Recent Articles

ESOP Determination Letter Update

Sheppard Mullin
October 31, 2011 19:17

Today, Donald Kieffer and Michelle Owen of the Employee Plans branch of the Internal Revenue Service (the "IRS") conducted a Phone Forum focused on the latest issues arising out of the ESOP determination letter process. This article is a summary of some of the items...

U.S. Department of Labor to Reconsider Proposed Regulation Impacting ESOP Appraisers

Sheppard Mullin
September 20, 2011 16:16

On September 19, 2011, the Employee Benefits Security Administration ("EBSA") of the Department of Labor ("DOL") announced it would reconsider and re-propose its regulation that would have included ESOP appraisers in the definition of "fiduciary " for ERISA purposes....

Court Upholds ESOP's Change in Investment Conversion Rules

Sheppard Mullin
September 02, 2011 23:14

A district court in Arizona has upheld an ESOP Committee's decision to amend the timing and manner in which terminated employees' company stock accounts are converted to other investments. Prior to the amendment, the ESOP provided the committee with the discretion at any time to "determine...

Ninth Circuit Adopts Moench Presumption in Favor of Fiduciaries

October 06, 2010 16:23

In Quan v. Computer Sciences Corporation, No. 09-56190, D.C. No. 2:08-cv-02398-SJO-JWJ, September 30, 2010, the Ninth Circuit has made clear it will apply the so-called Moench presumption in favor of fiduciaries who manage employer stock investments for 401(k) plans and ESOPs.  Quan involved a...

The Government is Here to Help; No Really!

June 24, 2010 21:03

Today, Robert Gertner and Claire Diefenbach of the Employee Plans branch of the Internal Revenue Service (the "IRS") conducted a Phone Forum focused on the issues arising out of the ESOP determination letter process. The IRS focused on two of the Technical Assistance ("TA")...

Final Regulations Issued on ESOP Diversification Rules

June 04, 2010 19:53

The Internal Revenue Service (the "IRS") recently issued final regulations governing the diversification requirements for certain ESOPs. As discussed in our February 15, 2008 blog article, the IRS issued proposed regulations under section 401(a)(35) of the Internal Revenue Code (the...

The IRS Wants to Review Your ESOP Distribution Policy

May 03, 2010 23:25

For the first time, the IRS is requiring that detailed ESOP distribution rules be provided to the IRS as part of the ESOP's determination letter submission.  Profit sharing plans and 401(k) plans are required to have fixed distribution rules stated in the plan documents--ESOPs are not subject...

ESOP Benefit Distributions - A Little Guidance on Financial Disclosure

February 01, 2010 22:30

In a recent California case, Balsley v. Delta Star Employee Stock Ownership Plan, the U.S. District Court in San Francisco added a little flesh to the bare bones questions of what if any financial disclosure must a company make to ESOP participants in connection with their benefit...

Pitfalls In Selling Stock To Fund ESOP Repurchase Obligations - Part II

Sheppard Mullin
April 07, 2008 20:44

In the first article on this subject that we recently posted, we considered the administrative and fiduciary issues that arise when an ESOP sells company stock to the company to fund its benefit distributions.  The fiduciary issues under the Employee Retirement Income Security Act of 1974, as...

Pitfalls In Selling Stock To Fund ESOP Repurchase Obligations - Part I

Sheppard Mullin
March 27, 2008 20:28

ESOPs often choose to make benefit distributions in the form of cash, rather than in company stock. Some of these ESOPs obtain the necessary cash by selling company stock to the company. This sale transaction raises two fiduciary issues under the Employee Retirement Income Security Act of 1974, as...