Air Tractor (Olney, TX)

Investing Dos and Don'ts for This (and Every) Market Cycle provides some tips to help investors in a volatile market cycle:

• The owner mentored his management team
• The owner's children have their own careers
• The owner wanted the company to remain in New Ulm
• The owner wanted its employees to share in the gains of the company
• The owner wanted to maximize the chances that the employees will retain their jobs
• The owner wanted his legacy to be the future success of the company in New Ulm
• The owner accepted the fact that he could possibly "have gotten more faster" if he pursued a third party sale

The article notes that it takes time to plan for an ESOP (although I want to point out it is possible, but not ideal, to close an ESOP transaction in six months):

We recently discussed the U.S. Sugar ESOP Issues. Florida to Buy U.S. Sugar's Land To Aid Everglades discusses how Florida is purchasing land from U.S. Sugar Corp. and leasing it back for the next six years before turning over the land for conservation purposes, effectively shutting down the company:

The state of Florida, stepping up its efforts to restore the Everglades wetlands, offered to purchase 300 square miles of land now used for sugar-cane production for $1.75 billion from U.S. Sugar Corp., effectively moving to shut down the largest grower of the crop in the U.S.

ERISA Class Action Defense Cases–Kirschbaum v. Reliant Energy: Fifth Circuit Affirms Summary Judgment In Favor Of Defense In ERISA Class Action Complaint Holding Class Action Claims discusses Kirschbaum v. Reliant Energy, Inc., No. 06-20157 (5th. Cir. 4/25/2008) (5th. Cir., 2008), a stock drop case that ruled in favor of the defense because the claims that they should not have invested in company stock ran counter to ERISA and because negligent misrepresentations were not made:

Eileen Fisher, Inc. (Irvington, NY)

A press release announced that Employee ownership and participation effects on firm outcomes, a study conducted by Brent Kramer, provides evidence that majority employee-owned businesses are more productive than their traditionally-owned counterparts:

The NCEO’s The Employee Ownership 100 has been updated and is now online:

Earlier this week we discussed the ESOP Ownership Structure, Corporate Governance, and the Relationship between the Trustee, Board of Directors, and the ESOP Administrative Committee. Managing a Board discusses the Board of Directors from the perspective of an entrepreneur. This perspective also applies to the founder of a company who has sold a controlling interest to an ESOP. It discusses the three obligations of an effective Board of Directors:

California's Franchise Tax Board (FTB) recently announced that taxpayers who filed a tax return that included "certain ESOP transactions" should resolve their accounts to avoid penalties:

I am often asked about how the ESOP ownership structure works. This post will explore corporate governance and the relationship between the Trustee, Board of Directors, and the ESOP Administrative Committee. Let's start with some terminology:

California Supreme Court's Decision on Domestic Partnerships May Raise Some Plan Document Issues discusses how last month's California Supreme Court Ruling (In re Marriage Cases, No. S147999 (May 15, 2008)) could create some plan document issues.

Earlier this week we discussed the 2009 Change in Reporting Distributions of 404(k) Dividends on IRS Form 1099-R. Reporting Rollovers from Pretax Plan Accounts to Roth IRAs discusses another IRS Form 1099-R reporting issue. It illustrates the reporting of a participant receiving a qualified plan (pre-tax) rollover distribution to a Roth IRA (after-tax) as provided by IRS Notice 2008-30 - Miscellaneous Pension Protection Act Changes by using an example. In the example, the participant is 50 years old, is requesting a distribution of his $100,000 account balance, and is electing that $25,000 be withheld for voluntary withholding. The article discusses how this scenario requires two IRS Forms 1099-R:

We recently discussed how the 402(f) Safe Harbor Special Tax Notice is out of date. Caution: IRS Model Special Tax Notice is Out of Date summarizes several law changes that must be incorporated into the Safe Harbor Explanation:

IRS Announcement 2008-56 – Change in Reporting Section 404(k) Dividends states that beginning with 2009 distributions, 404(k) dividend distributions must be reported on an IRS Form 1099-R that does not report any other distributions.

ESOPs were mentioned a few times in a report last week by the Joint Committee on Taxation, Tax Reform: Selected Federal Tax Issues Relating to Small Business and Choice of Entity (JCX-48-08), June 4, 2008:

There are currently five co-sponsors to H. Con. Res. 333: Expressing continued support for employee stock ownership plans, which was introduced by Rep Hinchey, Maurice D. [NY-22] on 4/24/2008:

An ESOP Fable with a Drafting Tip discusses Pension and Employee Stock Ownership Plan Administrative Committee of Community Bancshares Inc. v. Patterson, N.D. Ala., No. CV-04-BE-00531-S, 3/31/08, a case that permitted a plan to Use an Account Balance to Offset Damages Resulting from a Fiduciary Breach. We further expanded on this case in Criminal Sentences and Bad Boy Clauses – When ERISA Account Balances Can Be Recovered by the Plan.

Government Contractor ESOP Cost Accounting Rules Finalized expands on the new rules for Accounting for the Costs of ESOPs Sponsored by Government Contractors.

The New York Times published this Letter to the Editor regarding the U.S. Sugar ESOP:

The ESOP-Owned S Corporation: Bringing Ownership to Life with Synthetic Equity discusses how S Corporations can suffer from a cash drain as distributions are paid to shareholders to cover personal income taxes, ultimately putting the company in the same situation as a C Corporation. This can be avoided by creating a 100% ESOP-owned S corporation:

31st Annual ESOP Conference A Success! announces the success of the ESOP Association's recent Annual Conference, including a discussion on ESOP Sustainability and ESOPs in Existence for At Least 25 Years. It also provides a link to A Brief History of the ESOP Association through May 14, 1986, which documents the first ten years of the ESOP Association.

More people within the ESOP community are sharing their thoughts on the U.S. Sugar ESOP story. The latest Employee Ownership Foundation Blog post shares a few of the letters sent to the New York Times editor. Steve Sheppard, who authored one of the letters, expanded on his thoughts in Dispatched With Prejudice. The ESOP Blog also shares some comments on the U.S. Sugar story in The New York Times.

The June 2, 2008 Employee Ownership Update is online and discusses the following:

The Cost Accounting Standards Board (CASB) is a function located within The Office of Federal Procurement Policy (OFPP) in the Office of Management and Budget:

Filing Requirements for Filing Status Change provides guidance on the recommended steps to follow for making the election to change from a C Corporation to an S Corporation:

Sugar workers say company cheated them on pensions was initially was posted Tuesday, May 27, 2008 on the International Herald Tribune, the global edition of the New York Times. On Wednesday the New York Times website posted an online article titled Sugar Workers, Given Shares Instead of Pension, Wonder Why Price Is So Low. Saving the most sensational headline for the print edition,
In Stock Plan, Employees See Stacked Deck appeared on the front page of the Thursday, May 29 edition of the New York Times.