ESOP's Holding of Employer Stock Does Not Violate ERISA

In Steinmen v. Hicks, C.D. Ill. No. 00-3260, 3/21/03), a U.S. District Court ruled that the trustees of an ESOP were not liable for losses in a profit sharing plan when it was terminated and merged into an ESOP. Moorman Manufacturing had a profit sharing plan that was 65% invested in company stock. In 1997, ADM acquired Moorman and terminated its profit sharing plan, merging it into its ESOP. ADM allowed Moorman participants to roll their account balances into ADM's ESOP or an IRA, or they could take a distribution in cash. This process took two years; in the meantime, Moorman profit sharing assets were invested in ADM's ESOP. During that time, ADM stock fell from $23 to $15.56. Former Moorman profit sharing plan participants sued, arguing that ADM's ESOP trustees should have diversified, especially given the short time between termination of the profit sharing plan and distribution. The court disagreed, saying that the plan was intended to be "used both to foster employee ownership and as a technique of corporate finance." Trustees could not be held responsible for market fluctuations they could not have anticipated, the court concluded.