Blue Ridge ESOP Associates Industry News

Please note the following article is directly from The ESOP Association which was posted May 19, 2023.

Urgent action is needed - "The bipartisan WORK ACT, which would provide $50 million over four years for the establishment and programming of state sponsored or contracted centers to encourage Employee Ownership, is being considered now by the U.S. Senate." Now is the time to email your senators. The Employee Ownership Action Network has a great resource guide with a free email template. Follow this link for more information.

From The ESOP Association:

From The ESOP Association: "The ESOP Association is encouraged by today's news reports that Boston Mayor Marty Walsh will be nominated as the new Secretary of Labor. Mayor Walsh visited ESOP Association member Harpoon Brewery—including attending their share price meeting—and the city of Boston actively encouraged the formation of new employee owned companies during his tenure."

The ESOP Association (HQ) in DC will be providing tons of material via social media throughout the month. You may want to consider:

Michael Keeling, President of The ESOP Association, recently had an inquiry about what to do during a Congressional Site visit. His response was a 5 Step process:

1) A list of members of the House from your State that have co-sponsored HR 2092, the pro-ESOP bill, or the same bill in the last Congress, which was HR 2096. A member of Congress often looks to see what his or her colleagues are supporting and are influenced when those that they trust are behind a piece of legislation.

By J. Michael Keeling, President - The ESOP Association

No one knows the details of what might be included in the Congressional tax reform proposal expected this year. But the general talk we hear suggests some potentially good news, and some areas of concern.

First the good news: There have been no murmurings about reducing or eliminating any specific law pertaining to ESOPs. And, as of this moment, there has been no talk of reducing the generally favorable tax treatment for ERISA plans—which includes ESOPs, 401(k) plans, defined benefit pension plans, etc.

Now for the potentially concerning news: Tax bills are necessarily complex instruments, often ranging 2,000 or more pages in length. And any provision in a document that size might unintentionally affect ESOPs in a negative way.

Here are a few areas on which members of the ESOP community should keep a sharp eye:

Most companies with an ESOP also sponsor a 401(k) plan for their employees. However, the designs for these two plans are not always coordinated. The administration of the plans may lack coordination as well. It’s not uncommon to find ESOP and 401(k) plans sponsored by the same employer with differing definitions of compensation, differing eligibility exclusions, etc. Differences “by design” are fine, but unintentional differences can result in operational errors. The following real life examples (and commentary) illustrate the importance of coordinated design for paired ESOP and 401(k) plans.

Example 1: ABC Company adopts a new ESOP. Per the ESOP document, “Compensation” is gross compensation paid, less reimbursements, expense allowances, and fringe benefits. The corresponding definition in the 401(k) plan is gross compensation including fringe benefits. ABC Company provides the same census data to its 401(k) and ESOP administrators. After year end, the plan auditors discover that the ESOP third party administrator (TPA) has used the wrong compensation definition in allocating contributions.