Morgan Lewis on ESOPs
Summer 2005

In this Issue:

• New ESOP Legislation Introduced:
  Legislation entitled the ESOP Promotion and Improvements Act of 2005 has been introduced in Congress. The proposed legislation would provide enhanced benefits to ESOPs, particularly S corporation ESOPs.
• IRS Rules that Use of Proceeds from Sale of ESOP Shares to Repay ESOP Loan Did Not Violate the Exemption:
  In Private Letter Ruling 200514026, the IRS ruled that the cash proceeds from the sale of shares held by an ESOP sponsored by a company, identified as “Company B,” could be used to repay an ESOP loan.
• The Department of Labor Revises its Voluntary Fiduciary Correction Program:
  The DOL has proposed several revisions to its Voluntary Fiduciary Correction Program (VFCP). The revisions are intended to make it easier for plan sponsors to correct certain violations of ERISA, expand the types of transactions that can be corrected under the VFCP and simplify the methods for making corrections. The DOL has also proposed amendments to the prohibited transaction exemption applicable to certain transactions under the VFCP.
• Transfers to ESOPs from Terminating Defined Benefit Plans:
  The sponsor of a defined benefit plan is obligated to provide a specified amount of retirement income for each plan participant, usually computed as an average of the compensation the participants earned while working for the plan sponsor.
• Calendar of Events

For the full story, please view the PDF.