January 24, 2020

Jason Luter Shares Tips for Employers Running ESOPs

Jason Luter spoke with Law360 about Employee Stock Ownership Plans (ESOPs) and provided practical tips for employers when considering ESOPs as an option for employee retirement plans.

ESOPs provide workers with shares of company stock as part of their retirement plan. A recent ruling by the U.S. Supreme Court related to the Employee Retirement Income Security Act has now cast a shadow of uncertainty over the handling of ESOPs.

“When a company says, ‘I want to start an ESOP,’ the first thing I want to do is learn about the company and its owners because an ESOP isn’t the right fit for every company.”Jason Luter, Law360

Law360 reports that the administrative and financial burdens of launching an ESOP are high. Therefore, small, struggling companies probably shouldn’t go down this route. But large, stable companies with a solid financial platform could consider it as a viable solution, helping them benefit from a more involved employee base and tax incentives.

While the evaluation period varies, Luter suggests that trustees take at least six weeks to conduct their due diligence. “They have to determine that a fair price is being paid, that this is a suitable deal,” he said.

But initiating an ESOP isn’t the end of it. Continued education is crucial to success. “There’s value in having your ESOP committee members attend conferences, like the ESOP Association. There’s valuable education and information at those conferences,” Luter said.

Note: The full article is available only to subscribers.

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