The Employee Ownership Update
June 15, 2011
DOL Obtains $10 Million Settlement in Suit Against ESOP CompanyA lawsuit filed by the U.S. Department of Labor against the DirecTECH Holding Co. Inc. Employee Stock Ownership Plan resulted in six consent judgments requiring payment of $10,454,545 in restitution to plan participants and $1,045,454 in civil penalties to the federal government. The plan covered 5,799 participants employed by businesses in Kentucky, Michigan, and Louisiana. According to the DOL's suit, plan fiduciaries allegedly retained appraisers with insufficient qualifications, used inadequate valuation methods for stock transactions, and provided inaccurate information to the appraiser. Litigation against remaining defendants is ongoing.
San Francisco Provides Payroll Tax Relief for Stock OptionsSan Francisco Mayor Edwin Lee signed legislation that would give certain companies a partial tax exclusion on stock options. San Francisco had been the only jurisdiction in California to impose a payroll tax on gains on stock options, and the measure is designed to ensure that high-tech companies remain based in the city. The measure will reduce the tax for the next six years.
Senate Bill Addresses Proposed Fiduciary Status of ESOP Appraisal FirmsThree New England Republican senators (Kelly Ayotte of New Hampshire, Olympia Snowe of Maine, and Scott Brown of Massachusetts) introduced a bill that would prevent the Department of Labor from implementing regulations that would make ESOP appraisers fiduciaries of those plans. The DOL has not yet finalized its proposed new regulations, but comments by Phyllis C. Borzi, assistant secretary of labor for the Employee Benefits Security Administration suggest an ongoing interest in making ESOP appraisers plan fiduciaries. She said, "We knew [the proposed] regulation was going to be controversial, but there has been even more intensity than we expected."
NCEO members can join our June 23 Webinar on the topic. We have submitted comments on the proposed regulations.