The U.S. District Court, Southern District of Indiana, recently ruled in Craig v. Smith, 2009 WL 438635 (S.D. Ind. Feb. 20, 2009) that a company and its ESOP are jointly and severally liable for a breach of fiduciary duties by violating the terms of the plan document and IRC Section 409(h)(5) - Right to demand employer securities; put option - Payment requirement for total distribution by issuing a 10-year promissory note rather than the statutory limit of 5 years:

The Pension Protection Act of 2006 (PPA) provided for Rollovers to Roth IRAs beginning January 1, 2008. Making a Good Deal for Retirement Even Better discusses how the AGI income limitation for most individuals will be eliminated in 2010 and how to prepare for any IRA conversions.

Over the last few months we have discussed how to reduce or eliminate a Traditional Match, a Mid-Year Safe Harbor Match, and a Mid-Year Safe Harbor Nonelective Contribution, and we have discussed Communicating 401(k) Benefit Cuts. We have also discussed Conflicting Surveys on whether employers are reducing or eliminating matching contributions.

Last October we discussed technical advice memorandum (TAM) 200841042, which confirmed that ESOP Stock Distributions Subject to Immediate Put Option to Company are Stock Distributions eligible for net unrealized appreciation (NUA) treatment. One of the biggest takeaways from this TAM is the documentation of a distribution process accepted by the IRS. While the documented distribution process has been helpful, questions have come up about the process of issuing and cancelling stock certificates. The distribution process discussed in the TAM involved cancelling the Plan's stock certificate, issuing new certificates to the Plan and to the participant, and then cancelling the participant's stock certificate upon redemption of the shares by the company. The TAM also cited IRS Revenue Ruling 81-158, 1981-1 C.B. 205 - Taxability of beneficiary under a trust which meets the requirements of section 401(a), which provides that a profit sharing distribution occurs upon the delivery of stock certificates to a transfer agent with instructions to reissue them in the name of the distributee.

Earlier this week a Historic Overhaul of Finance Rules was announced:

The June 12, 2009 Employee Ownership Update is online and discusses the following:

He's Just Not That Into You: What Employees Really Think of Their Employers discusses how a recent survey found that less than one third of employees are engaged in their work. It compares the employee engagement issue to parenting young children:

Last November we discussed how Thriving ESOP-Owned Banks like the Paducah Bank & Trust Company Keep Employee Turnover Low.

2009 Edmunson Scholarship Award Winners announces the winners of the 2009 Charles R. Edmunson Scholarship:

The 2009 symposium was broken up into two sessions: morning – how fit and resilient are ESOP companies in the current economic crisis?; afternoon – given their stability and long-term perspectives, are ESOP companies hotbeds for green management and making the business case for sustainable development?...

Loan Covenants Tighten Up shares some best practices to consider when talking to a lender:

In mid-May we discussed how proposed Treasury Regulation [REG–115699–09] – Suspension or Reduction of Safe Harbor Nonelective Contributions provides for the Suspension or Reduction of Safe Harbor Nonelective Contributions Mid-Year for both a traditional safe harbor plan and a qualified automatic contribution arrangement (QACA). The proposed regulations provide similar guidance to eliminating the safe harbor nonelective contributions that already exist for Mid-Year Safe Harbor Matching Contribution Changes. Unlike reducing or eliminating the match, the nonelective contribution may only be eliminated if there is a substantial business hardship. Needed Relief for Suspension of Safe Harbor Nonelective Contributions Arrives—With a Catch raises concerns with the fourth substantial business hardship requirement that "it is reasonable to expect that the plan will be continued only if the waiver is granted":

We have recently discussed valuation issues created by the current economic environment, including Declining Valuation Multiples, How Public Company PE Ratios Impact an ESOP Valuation, and Employee Communications and Involvement in Tough Economic Times. Economic Crisis Raises Questions About Business Valuation Standards discusses some of the new questions and issues that valuation professionals and ESOP fiduciaries face in today's environment: