Rick Pearl Discusses Future of ESOP As Questions, Lawsuits Mount With Bloomberg Law

Benefits and executive compensation partner Rick Pearl recently provided insights on employee stock ownership plans (ESOP) with Bloomberg Law as employee-owned companies are targeted in lawsuits over how ESOP funds are invested. 

Pearl emphasized that ESOPs are different than traditional retirement plans, and investors therefore aren’t subject to traditional fiduciary obligations. He said that Congress has made the differences between the two, which may cast doubt on the success of the incoming lawsuits. 

“Congress knew full well that an ESOP wasn’t diversified, that it can be very risky, and that there will be ebbs and flows in stock price over time,” Pearl said. “This wasn’t meant to replace 401(k)s or pension plans; this was meant as something totally different.”