The adequate consideration requirement relating to sales of employer stock to and from tax-qualified retirement plans

Article Abstract:

An adequate consideration exemption exists for transfers of employer's stock between a qualified plan and either the employer or a disqualified person that would otherwise be considered a prohibited transaction. When selling, the plan must receive no less than adequate consideration, and when buying, the plan must pay no more than adequate consideration. The Dept of Labor has released proposed regulations that identify how to value adequate consideration, particularly if the stock is privately held. The regulations identify required components of the appraisal.

Evaluation, Consideration (Law)

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Trustee not liable for alleged breach of fiduciary duties due to sale and immediate buy-back of ESOP stock

Article Abstract:

The US 8th Circuit Court of Appeals in Herman v. Mercantile Bank, N.A. held that a purchase of stock for adequate consideration was enough to reject the US Labor Dept's (DOL) argument that a former stock ownership plan trustee breached its fiduciary duties to plan participants. The former trustee did not act to prevent or ameliorate harm from the purchase of stock by the successor trustee one day after the former trustee sold that stock to an unrelated third party.

Cases, Fiduciary duties

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Counting top-hat plan contributions as compensation does not discriminate against NHCEs

Article Abstract:

The IRS in Letter Ruling 9841021 approved an employee stock ownership plan designed pursuant to IRC section 423 as nondiscriminatory. The nonqualified deferred compensation plan was offered only to certain highly compensated employees. Since only cursory analysis supports the IRS's conclusion, the influence of the ruling on other section 423 plans is uncertain.

United States, Pension Funds & Benefit Plans, Pension funds, Employee benefits

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