ESOPs. DOL. Disappointed participant. Investigation. Litigation. A recent survey of DOL litigation against ESOP fiduciaries proves that ESOP valuations are the focus of ESOP litigation. Some areas of valuation continue to engender controversy and more valuation issues are looming in the background. Gain confidence with insights from James Joyner in this practical, in-depth session that doesn’t dodge the hard questions. ESOP trustees, appraisers, advisors, and auditors will come away more prepared for their next ESOP engagement with a review of 10 controversial areas in valuation, plus a review of the recent cases, current insights, and new tactics. You won't want to miss this session!
Program Agenda
ESOP Enforcement
Employee Benefits Security Administration (“EBSA”) enforcement and insights
ESOP Litigation Continues
Notable ESOP litigation by DOL:
Litigation trends
A Non-Attorney’s Outline of ESOP Litigation
ERISA §404 Fiduciary duties and ERISA §406 Prohibited transactions
DOL Litigation Tactics
Fiduciary Process Agreements
GreatBanc fiduciary process agreement (now 4 or 5 agreements)
Quality of financial data
Choice of appraiser
Information in appraisal
Contents of ESOP Appraisal Reports
Controversial Valuation Topics
Although DOL valuation positions are unclear, ESOP appraisers must be very clear
Income methods: capitalization of earnings vs DCF
CAPEX and working capital investment
Excess cash and working capital
Nonoperating or unused assets
Lack of control discount
Marketability discount
What is known and knowable (Sentry Equipment ESOP vs Zander Group ESOP)
Suggestions to ESOP Appraisers
Forecasts
Terminal value and perpetual growth
Debt capacity analysis for highly leveraged ESOPs
Fairness opinions and adequate consideration opinions are under scrutiny
Appraisers Should Educate Trustees about Valuation Issues
Excursus on EBSA Enforcement
How effective can a government agency be with no ethical standing
Learning Objectives
Summarize three notable ESOP cases
Restate DOL litigation tatics
Describe three controversial valuation topics for ESOPS
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