The Employee Ownership Update
August 3, 2015
Policy Proposal: Support Employee Ownership and Profit SharingOn July 21, the Center for American Progress, released the report Capitalism for Everyone. The authors, Karla Walter, David Madland, and Danielle Corley, make a case for policies designed to encourage companies to adopt employee ownership programs and broad-based profit sharing, to paraphrase the report's subtitle. The report opens, "[w]hen a company does well, so should its workers. American workers have helped the economy grow by becoming more productive. . . . Broad-based sharing programs—such as granting workers an ownership stake or a share of profits based on workers' collective performance—can help ensure that workers are rewarded for the wealth they generate."
The authors argue for changes in tax code, the creation of an Office of Inclusive Capitalism, and adjusting rules for determining which businesses qualify as minority- or women-owned, and they endorse the Promotion and Expansion of Private Employee Ownership Act, which supports S corporation ESOPs.
IRS To Eliminate Periodic Determination LettersIn 2006, the IRS issued rules requiring companies to file a new letter of determination every five years, based on a five-year reporting cycle determined by employer identification numbers. In Announcement 2015-19, the IRS said it would eliminate the five-year remedial amendment cycles effective after January 1, 2017. Because of the timing of the change, the IRS will continue accepting applications for Cycle A plans through January 31, 2017, which is the end of that cycle's submission period.
The change in requirements for periodic letters of determination should reduce some costs for ongoing ESOP compliance, but it also means that companies will not have any assurances that changes they make to a plan are acceptable to the IRS on audit. As a result, companies will need to be particularly diligent in making sure any changes they make to their plans are fully compliant with the law, including periodic internal reviews to make sure plan requirements are being followed.
CEP Exam on November 7Registration is now open for the Certified Equity Professional November exam. Candidates who pass the three-part CEP exam become certified equity professionals, the only industry-recognized designation for professionals who administer stock options, restricted stock grants, stock appreciation rights, employee stock purchase plans or performance arrangements. The Certified Equity Professional Institute, part of Santa Clara University's Leavey School of Business, runs the exam. Those interested in the exam can learn more online. The NCEO publishes most of the texts the CEPI uses, and we also have a Prep Course for the exam.
Job Search: Director of the Pennsylvania Center for Employee OwnershipThe Pennsylvania Center for Employee Ownership (PCEO) is an emerging nonprofit organization dedicated to outreach about employee ownership in Pennsylvania. Through the efforts of a group of dedicated volunteers and the NCEO, the PCEO has started enough projects and raised enough funds to hire a full-time in-state director. Please help us connect with people who might be good candidates. The job description is online as a PDF and a web page. Resources for people interested in helping with the job search, including ready-to-use text you can email, are on the PCEO resource page.
The PCEO is designed to supplement, rather than compete, with existing organizations such as the ESOP Association's chapters and the state employee ownership centers in Ohio, Vermont, and the Rocky Mountains.