Blue Ridge ESOP Associates Industry News

Fidelity Bond Coverage for your ESOP

When preparing or reviewing your ESOP’s Form 5500 annual return, you may notice that Line 4e on Schedule H for large plans and Schedule I for small plans asks the following: “Was this plan covered by a fidelity bond?” It is important to not only make sure that your ESOP is covered by a fidelity bond, but that you have the required amount of coverage each year and that you relay this information to your third-party administrator or the party responsible for completing your Form 5500.

Hardship Withdrawals

In an April 2015 article, the IRS said plan sponsors must maintain supporting documentation for hardship withdrawals.  The IRS asserted that it was not sufficient to rely on a participant’s self-certification that criteria for a hardship distribution had been met.  The IRS also said that a plan sponsor’s failure to maintain hardship documentation was a plan qualification issue.  That last assertion drew criticism from some daily recordkeepers who were relying on participant electronic certification for hardship withdrawals.

For many companies, it’s time once again for the annual distribution of ESOP participant statements. Are you ready to make the most of the opportunity? Unfortunately, many firms miss this great chance to build ESOP knowledge and engage employees as owners.

If you want to enhance your ESOP’s power as a recruitment, retention and employee engagement tool, the statement is a great place to start.  After all, your firm is investing significant amounts of money to provide employees with a retirement benefit. If you’re not informing them about how your ESOP benefits them, you’re missing a great opportunity.

Here are three practical ideas to make more of your annual statements:

Today, ESCA released a survey by John Zogby Strategies that finds employees who work at private, employee-owned companies are more confident about their jobs and less anxious about their financial futures than other workers.

Congratulations to Thomson-Shore and Wiley Wilson for their awards at this year's Annual Awards for Communication in Excellence hosted by The ESOP Association.

The ESOP Association's 40th Annual Conference is being held May 10-12. Several of our staff will be attending the AACE awards dinner on Wednesday evening. On Thursday, May 11 at 10 am, Dolores Lawrence will co-present Administration Cycle - Part I - How Balances Accumulate.  The session covers  ESOP eligibility and allocations to participant accounts as well as an overview of ESOP compliance testing.

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:

Members of the Blue Ridge ESOP Associates team will be attending on Friday, April 28, the 31st Annual Ohio Employee Ownership Conference.

Tom Roback will be co-presenting at the Exit Planning Institute's monthly meeting in Tyson's Corner on April 19. This meeting will review the different options available in transitioning the ownership of a company. For more information and to register for this meeting click here.