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The Employee Ownership Update

Loren Rodgers

November 3, 2014

(Loren Rodgers)

Help Requested for a Project on Purchasing Preferences and Employee Ownership

ESOPs can cause companies to lose their certifications as for small businesses or as women-, minority-, or veteran-owned businesses. The Small Business Administration, for example, interprets federal rules such that a 100% ESOP-owned company where all participants, the ESOP trustee, and the board of directors are women would not qualify as a women-owned business. Many other organizations, from quasi-governmental organizations to nonprofits to large corporations, provide different types of certification. Their rules vary widely, creating confusion.

The NCEO is starting a project to catalog the various standards and to document their relevance to employee-owned companies. Help us determine how this affects our membership by taking this two-minute, five-question survey.

European Commission Official Advocates Employee Ownership
Michael Barnier, the European commissioner for internal market and services, wrote in an October 28 opinion article in London's City A.M. that "Employee shareholding schemes can contribute to tackling the rising imbalances in income distribution. They can also help us rediscover the foundations of the competitive social market economy which characterises the European model, and can help put our economy on the road to more sustainable growth, starting with local initiatives." Barnier noted that the Commission recently published a report, Taking Action: Promotion of Employee Share Ownership - Debating Concrete Policy Options on ideas to spur more employee ownership in European companies.

Securities and Exchange Board of India Eases Rules for Employee Ownership Plans

The Securities and Exchange Board of India (SEBI) has liberalized rules for traded companies to acquire their own shares under employee stock ownership plans. Until now, companies could not make secondary market purchases to buy shares for employee ownership plans through trusts. SEBI was concerned companies were using these trusts to provide market support for their shares. The new rules allow for ownership trusts to buy back shares for up to 2% of paid-in capital per year, provided shares held by other employee benefit plans do not exceed 10% of all shares. Companies must get approval from shareholders, follow disclosure rules, and not sell shares in the trusts for at least six months after purchase.

Ownership plans in India are often called "ESOPs" but generally are stock option plans. They are particularly popular in technology companies, although broad-based grants are given by only a minority of the firms.

IRS Announces 2015 Retirement Limits

On October 23, the Internal Revenue Service issued an announcement with the 2015 dollar limitations for pension and retirement-related plans. Some excerpts follow:

"Section 415 of the Internal Revenue Code provides for dollar limitations on benefits and contributions under qualified retirement plans...The limitation for defined contribution plans under Section 415(c)(1)(A) is increased in 2015 from $52,000 to $53,000.

"The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan remains unchanged at $170,000.

"The dollar amount under Section 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan subject to a 5 year distribution period is increased from $1,050,000 to $1,070,000, while the dollar amount used to determine the lengthening of the 5 year distribution period remains unchanged at $210,000.

"The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) is increased from $115,000 to $120,000."

The NCEO Is Accepting Nominations for Our Board of Directors

The NCEO began accepting nominations and self-nominations for its board of directors today. The board is actively engaged in supporting various NCEO projects, such as providing input on research projects, generating publications, creating outreach opportunities to help the NCEO reach new audiences, supporting state employee ownership centers, and much more. Those interested in learning more can refer to our resource page for board candidates or contact Loren Rodgers (, 510-208-1307). Nominations will be accepted until December 12.

Author biography and other columns in this series

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