The Employee Ownership ReportConcisely written for leaders in employee ownership companies and for service providers in the field, the NCEO's bimonthly newsletter, the Employee Ownership Report, is the most efficient way to stay informed about legal issues, current events, best practices, breaking research, management approaches, and communications ideas for employee ownership companies.
Available exclusively to NCEO members, the Employee Ownership Report is delivered in hard copy and all issues back to 1997 are available in the members-only area of the Web site.
Nonmembers are invited to read the sample article below from the current issue of the newsletter. Every time a new issue appears, the sample article on this page will be replaced by one from the new issue. Join online for only $90 to receive the Employee Ownership Report and all our other membership benefits.
Read a sample issue of the entire newsletter (September-October 2015).Sample Article from the March-April 2016 Issue:
DOL and IRS Plan AuditsBased on a presentation by Brian Anderson, DeWitt Ross & Stevens and Vicki Graft, ESOP Partners LLC
This article is excerpted from the new NCEO issue brief Great Ideas from the NCEO's 2015 Annual Conference, which summarizes many of the most interesting presentations at the 2015 Employee Ownership Conference in Denver.
The DOL and IRS conduct hundreds of audits of ESOPs every year. Audits can be triggered by several things:
- Random compliance audits (randomness can be influenced by geography, industry, or type of plan)
- A complaint by a disgruntled participant, beneficiary, service provider, or other fiduciary
- Newspaper stories
- Review of Form 5500
- Low number of participants compared to total number of employees
- Large losses shown on plan's financial statements
- Significant decrease in plan participation
- Large amounts of administrative expenses
- Large percentage of assets identified as "Other"
- Large distributions
- Mere status as an ESOP or S corporation ESOP
- Improper valuation of employer stock
- Reporting and disclosure violations
- Failure to make benefit payments due under terms of the plan
- Taking any adverse action against an individual for exercising his or her rights under the terms of the plan
- Failure to hold plan assets in trust (failure to title assets in the name of the plan)
- Employer stock not held in the name of the plan/trust
- Use of plan assets to benefit certain related parties-in-interest to the plan, including the plan administrator, the plan sponsor, and parties related to these individuals
- Failure to have procedures in place for the selection of service providers and investments
- Plan distribution issues
- Put option/promissory note issues
- ESOP loan defaults
- Share allocation
- Use of loan proceeds
- Correction of prohibited transactions
- Restoration of losses
- Removal of fiduciaries
- Removal of service providers
- Appointment of an independent fiduciary
- Implementation of new internal controls
- Supplemental distributions to participants and beneficiaries
- Final accounting and termination of the plan