Archive 2014-77: ESOPS




Archive 2014-77: Employee Stock Ownership Plans: Understanding their Mechanics and the Nuances to Valuing Them

**Webinar 77 Live Broadcast Date: August 20, 2014 **

presented by
Robert Grossman, CPA/ABV, CVA, ASA, MST, CBA and Melissa Bizyak, CPA/ABV/CFF, CVA

VPS StraightTalk Webinar Series: Employee Stock Ownership Plans

Employee stock ownership plans (ESOPs) can provide shareholders, companies, and employees tax and economic benefits not otherwise attainable under U.S. tax law and other transaction strategies. ESOPs are, first and foremost, qualified retirement plans. The key benefit of any qualified retirement plan is the ability to provide a future retirement benefit to current and past employees of the company without invoking current taxation of the economic value of the benefit to the employee. The deferral leads to a greater economic return since earnings accumulate, effectively, tax-free while remaining in the plan, which in turn allows for greater compounding. In addition, the qualified retirement plan rules generally allow, in the year contributed, a current income tax deduction for amounts contributed to the plan by the sponsoring organization. These valuable tax benefits come at the cost of a complex scheme of rules designed to protect the plan participants and limit top-heavy contributions. In this light, potential users of ESOPs must carefully consider the qualified plan rules and determine exactly how the ESOP will integrate into current qualified retirement plans and, ultimately, if those qualified plans being offered require modification to allow for the effective use of an ESOP.
The Employee Retirement Income Security Act of 1974, as amended (ERISA), requires that ESOPs pay no more than “adequate consideration” when investing in employer securities. As one could then deduce, valuation lies at the heart of all ESOP planning. Not only is value important at the outset of the planning process, as value necessarily equates to consideration for shareholders who are being asked to sell their shares in the transaction, but it is equally important to plan participants whose future investments may be predicated upon the performance of the ESOP stock. There are a number of ESOP-specific factors and variables that must be considered when performing a valuation for an ESOP sponsor company.
Many parties rely on the valuations performed in this area, including the trustee, the plan participants, the sponsor company, the lending institutions (in a leveraged ESOP transaction), and regulatory and taxing authorities.
Despite the importance of ESOP valuations and the scrutiny that the valuations may receive, critical mistakes continue to be made in this area as evidenced in court cases and industry publications.

Learning Objectives:

This webinar will provide a broad understanding of these plans and the nuances in valuing ESOP stock. Specifically the attendees will learn:

  • What is a good ESOP candidate and what considerations drive a recommendation of an ESOP?
  • Why it is important to obtain a feasibility study.
  • The mechanics and plan structure of the Initial transaction.
  • The alternatives available for funding ESOPs.
  • The operational Issues for ESOP-owned companies.
  • Issues to consider when looking at repurchase obligation liability.
  • As well as the valuation requirements and considerations.

It is the presenters’ intention that no matter a participant’s experience level, he or she can take away information that will prove valuable and helpful
for his or her respective practice.


Information on CPE credits, refund policies, and complaint resolution can be found at

Included in this downloadable archived webinar package:

  • Audio/Video file
  • Webinar transcript
  • Original Webinar handouts

The archived webinar package is an Adobe Presenter PDF file that allows you to view the video of the webinar with the synced audio so that you see the presentation just as it was presented “live.” The Presenter format also allows for easy navigation through the webinar so you can quickly go to a specific section in the presentation. The handout materials are included in the file. To view the Webinar Presenter file, you must have Adobe Reader software version 9 or higher. You can download the free current version of Adobe Reader at

Additional information

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