Morgan Lewis on ESOPs
November 2005

In this Issue:

• Best Plan Practices for Retirement Plans Holding Company Stock:
  It seems that hardly a week passes by without news of yet another company or plan fiduciary being sued by employees over drops in the value of company stock held by the company’s retirement plan. Most of the attention has been engendered by the spectacular collapse of several large public companies whose 401(k) retirement plans were invested in stock of the sponsoring employers. In particular, several articles have been written, and more will undoubtedly be written, on what the Enron and WorldCom plan fiduciaries did or did not do as company stock prices declined dramatically over a very short period of time.
• McKesson Revisited Yet Again- District Court Applies a Bright-Line Test to Exempt ESOP Fiduciaries from Liability for Failure to Diversify:
  On September 9, 2005, the U.S. District Court for the Northern District of California ruled that members of McKesson Corp.’s board of directors did not breach their fiduciary duties when they failed to divest the company’s ESOP of employer stock. The facts of the case, and the court’s prior tentative rulings, were outlined in detail in the September issue of Morgan Lewis On ESOPS.
• IRS Announces Retirement Plan Dollar Limitations for 2006:
  The Internal Revenue Service has announced the 2006 cost-of-living adjustments to dollar limits applicable to retirement plans.

For the full story, please view the PDF.