There have been significant developments that will impact the future of US Department of Labor regulations and litigation related to employee stock ownership plans (ESOPs). Ted Becker and Julian André recently presented a webinar for the National Center for Employee Ownership and shared what ESOP fiduciaries, ESOP company directors, and employees involved with ESOPs need to know about these changes.
Increasingly, sellers of stock and others who customarily have not been named as defendants alongside employee stock ownership plan (ESOP) trustees are being sued in lawsuits relating to ESOPs. Chris Nemeth and Jane Kim recently presented a webinar to members of the National Center for Employee Ownership (NCEO) analyzing this trend. They discussed the types of claims recently brought against sellers, company executives, outside investors and other non-trustees in recent lawsuits relating to ESOPs, and they offered practical tips for protecting against such lawsuits.
Watch the recording here.
In this webinar recorded for the National Center for Employee Ownership (NCEO), Ted Becker and Julian André discuss the changing landscape of employee stock ownership plan (ESOP) litigation. The program covers trends in recent significant court decisions relating to ESOPs as well as the latest theories advanced by plaintiff’s counsel and the US Department of Labor.
In 2016, Inland Fresh Seafood Corporation of America established an employee stock ownership plan (ESOP), a type of defined contribution employee benefit plan. The ESOP then purchased 100% of Inland Fresh stock from Inland Fresh’s former shareholders.
Since the ESOP was founded, it has provided substantial benefits to Inland Fresh’s employee participants.
In November 2022, four former Inland Fresh employees filed an Employment Retirement Income Security Act of 1974 (ERISA) class action complaint against Inland Fresh, a number of its executives, its outside counsel, the ESOP Committee and the ESOP’s independent trustee.
The complaint alleged that the defendants breached their ERISA fiduciary duties, engaged in transactions prohibited by ERISA and ultimately caused the ESOP to pay more than fair market value for Inland Fresh stock during the initial transaction.
How can employee stock ownership plans (ESOPs) help business owners ensure their businesses remain locally owned? In this article published in The Gazette, McDermott Partner Ted Becker provides insight into this popular type of employee benefit plan.
“The most important thing to do is to get an adviser who understands ESOPs,” Becker said.
On June 7, 2022, Senators Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY) introduced the highly anticipated Responsible Financial Innovation Act (the bill), which sets out to create the first complete regulatory and bipartisan framework for digital assets. The bill is intended to establish some legal clarity for regulators and the industry and to protect consumers by providing a range of disclosures and clarifying settlement conditions and rights over digital ownership. The bill would also treat all digital assets that are not treated as securities as commodities regulated by the Commodity Futures Trading Commission. This article discusses key tax considerations raised by the bill concerning taxation and reporting requirements for participants in the digital asset industry.
On May 6, 2022, McDermott Partner Chris Nemeth delivered a presentation during the 2022 TEA National Conference titled “ESOP Litigation: Latest Trends and Open Questions.” His presentation focused on recent significant employee stock ownership plan (ESOP) court decisions and emerging litigation trends in the ESOP industry. Chris and his co-presenter touched on the enforceability of arbitration clauses in the Employee Retirement Income Security Act of 1974 (ERISA) litigation, post-transaction debt forgiveness, and pleading and standing requirements.
For questions about employee benefits matters, please contact Chris or McDermott’s employee benefits practice team.
On May 5, 2022, McDermott Partner Allison Wilkerson delivered a presentation during the 2022 TEA National Conference titled “Mature ESOPs: Remodeling the House You Own.” Her presentation focused on the traits of a sustainable employee stock ownership plan (ESOP), common concerns of a mature ESOP and other ESOP-specific investment issues. Allison and her co-presenters also discussed redemption, re-leveraging and the hot acquisition market.
The presentation concluded with the following suggestions:
For questions about employee benefits matters, please contact Allison or McDermott’s employee benefits practice team.
On May 5, 2022, McDermott Partner Erin Turley delivered a presentation during the 2022 TEA National Conference titled “Understanding a Trustee’s Role in Management Incentive Plans.” Her presentation focused on the trustee’s role in Management Incentive Plans (MIPs), how retention and performance stock appreciation rights (SARs) impact an employee stock ownership plan (ESOP) and ways to avoid trustee pitfalls with a MIP. Erin also discussed types of synthetic equity design decisions, incentive stock options, non-statutory stock options and phantom stock/SARs.
The presentation concluded with the following fiduciary considerations:
For questions about employee benefits matters, please contact Erin or McDermott’s employee benefits practice team.
Earlier this spring, McDermott Partner Erin Turley delivered a presentation about the impacts of recent Employee Retirement Income Security Act of 1974 (ERISA) litigation. Lawsuits now target both large and small employee benefit plans; plan sponsors are being sued and dragged into complex and lengthy litigation, thus changing the basic economics of the provision of fiduciary liability insurance. In response to these lawsuits, plan sponsors are looking to outsource as much of this fiduciary responsibility and potential liability and exposure as possible.
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