A multitude of fiduciary issues arise in connection with employee stock ownership plans (ESOPs), starting with the question of who is a fiduciary. These issues affect many of the matters connected with the establishment and administration of an ESOP and involve many of the people involved with the plan. In this litigious age, acting as an ESOP fiduciary can be an unnerving prospect for some, and many people not designated as fiduciaries may find that they actually have that status. However, if fiduciaries keep informed, hire good advisors, and act in the best interests of plan participants, they are very unlikely to be sued, let alone to have a judgment entered against them.
This book, written by one of America's foremost experts on ESOPs, provides an accessible and detailed look at the kinds of fiduciary questions that arise in an ESOP context. Not only fiduciaries but also anyone involved with evaluating, implementing, or operating an ESOP will find it to be an invaluable reference.
The book is in question-and-answer format; there are 144 questions and answers in all, plus a foreword by NCEO Senior Staff Member Corey Rosen.
Table of Contents
Chapter 1: Determining Fiduciary Status
Chapter 2: Fiduciary Duties
Chapter 3: Prohibited Transactions
Chapter 4: Purchases and Sales of Employer Securities
Chapter 5: Personal Liability
Chapter 6: Protecting Against the Risk of Liability
From Chapter 1, "Determining Fiduciary Status" (footnotes omitted)
Q19 Can corporate officers and directors be plan fiduciaries for some purposes, but not for others?
Yes. ERISA states that "a person is a fiduciary with respect to a plan to the extent (1) he exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets . . . ." An individual may serve both as a fiduciary and as an officer or other representative of a plan sponsor, and that individual then will serve dual roles with different duties and responsibilities. Plan administrators who also are officers of the plan sponsor assume fiduciary status only when and to the extent that they act as plan administrators, and not when they conduct business unregulated by ERISA. Therefore, when a person who is both an ERISA fiduciary and a corporate officer undertakes day-to-day business operations that may have a collateral effect on employee benefits, ERISA does not require that he or she operate solely in the interest of plan participants.
In determining whether a person who serves both as a corporate officer or director and as an ESOP fiduciary is subject to the ERISA fiduciary rules with respect to any particular act or omission, it must be determined whether the act or omission relates to a matter or transaction that involves plan assets. The duties imposed upon fiduciaries of employee benefit plans by ERISA apply only to transactions that involve the assets of the plan and to activities that involve the administration of the plan. In the case of an ESOP, the plan assets are the shares of the plan sponsor (and any other assets held by the plan). The Department of Labor's regulations interpreting ERISA make clear that properties acquired and owned by the plan sponsor are not themselves plan assets. Where an employee benefit plan, such as an ESOP, invests in an operating company, the plan's assets include its investment, but do not include any of the underlying assets of the operating company.