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The Employee Ownership Update

Loren Rodgers

November 1, 2016

(Loren Rodgers)

California District Court Holds ESOP Fiduciaries Liable for Misadministration of Plan Termination

The District Court of Northern California ruled on October 24 that the fiduciaries of the California Pacific Bank were personally liable for $875,000 resulting from their failure to follow plan documents during the termination of the ESOP in 2011. The plan required distribution of accounts in cash, but the bank made the distributions in shares of company stock. An article in Bloomberg BNA quotes Rebecca Miller at RSM US LLP: "The lessons learned from this are simple—read your plan, follow its terms, keep accurate financial records, properly segregate plan assets from plan sponsor assets and when confronted with an unusual transaction, such as a plan termination, read everything again and seek experienced assistance."

Baker & McKenzie Releases New Global Equity Matrix

The Global Equity Services Practice Group at the law firm Baker & McKenzie announced last week that it had released an updated version of its Global Equity Matrix. The matrix summarizes important issues for global equity awards, including covers tax and securities, exchange control, labor and data privacy issues.

A New ESOP Brew

The announcement starts, "The brewers at Harpoon Brewery and Odell Brewing Co. brew like they own the place—because they do own the place." The two ESOP-owned breweries announced that they are collaborating to release a seasonal beer—EHOP—that celebrates hops, oats...and employee ownership.

The IRS Releases 2017 Limits

The IRS released its 2017 limits for retirement plans, several of which directly affect ESOPs. (For a table comparing 2015, 2016, and 2017 limits, see this page at The limitation on annual additions for defined contribution plans increases in 2017 from $53,000 to $54,000, or to $60,000 for those eligible for "catch-up" contributions. The limit is this dollar amount or an amount equal to 100% of the participant's compensation, whichever is less.

The dollar amount for determining the maximum ESOP account balance subject to a 5-year distribution period is increased from $1,070,000 to $1,080,000, while the dollar amount used to determine the lengthening of the 5-year distribution period is increased from $210,000 to $215,000.

The dollar limitation concerning the definition of "key employee" in a top-heavy plan is increased from $170,000 in 2016 to $175,000 in 2017. The limitation used in the definition of "highly compensated employee" remains unchanged at $120,000.

Leadership Changes at New Belgium Brewing

In October, Christine Perich announced that she would be stepping down as CEO of New Belgium Brewing. Although some have speculated that her departure may be connected to a possible sale of the company, New Belgium's public relations director Bryan Simpson says, "Christine's departure is completely independent of any past speculation around New Belgium's capital structure. . . . There are absolutely no plans to sell New Belgium at this time."

John Lewis Partnership Announces New Chief Executive

The flagship employee-owned company in the United Kingdom, the John Lewis Partnership, announced that its new managing director would be Paula Nickolds, whose career at the company started in 1994 as an intern. The company faces economic headwinds, with a 15% drop in profits for the first half of 2016.

Conscious Company Covers ESOPs

The magazine Conscious Company, whose readers focus on various areas of socially responsible business, published an article by Corey Rosen that outlines four reasons companies should consider ESOPs.

CEO of Employee- and Woman-Owned Business Addresses TechWomen

Geraldine Ferlins, the CEO of Citronics, will keynote the TechWomen|TechGirls Power Breakfast in Manchester, New Hampshire. Cirtronics is a woman-owned and 40% ESOP-owned manufacturer.

NCEO Launches ESOP Document Library

In order to continue to provide practical, hands-on resources to members, today the NCEO is launching its document library for members (member username and password required), which includes examples of checklists, RFPs, interview questions, and other documents designed to be adapted and used by ESOP companies.

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