Increasing numbers of businesses are offering Employee Stock Ownership Plans (ESOPs) as a way of staying competitive in terms of attracting top quality job candidates. While being offered a chance to own a share of the company you work for may seem like an appealing offer, it is up to the plan administrator to manage it properly. They have a fiduciary duty to act prudently and in your best interests, and if they fail to do so, could be subject to breach of fiduciary claims.
ESOPs have gained popularity among employers as a way of providing additional company perks for an employee. BankRate advises that as it generally costs the employee nothing to be a part of these plans, there is no reason not to take advantage of the potential benefits. At the same time, you should know what you are getting into and how to evaluate your ESOP properly. They advise that these types of plans should not carry the whole weight of your retirement planning, and as you are basing any potential profits on the success of the business, if you are in an industry that is generally declining, you should adjust your expectations according.
Prior to enrolling, you should be provided with a summary plan description, which includes information about the plan, your eligibility requirements, and the plan administrators. The following are three key issues to evaluate when considering an Employee Sponsored Ownership Plan:
As ESOP benefits are usually offered by private companies and corporations, they are generally covered under the Employee Retirement Income Security Act of 1974 (“ERISA”). This sets minimum standards in retirements and pension plans that work to protect employees. One of ERISA’s requirements is that a person or group of people with fiduciary duties manages and administers the plan and its benefits.
A fiduciary has an obligation to act in the employee’s best interests, and with an ESOP, this requires the following:
Failing to uphold any of these duties can leave the fiduciary vulnerable to claims when employees suffer losses. If you have concerns about your ESOP or problems with obtaining benefits, contact Michael Bartolic, LLP today. With our decades worth of experience as a Chicago ERISA attorney, we have helped people in similar situations get the benefits they deserve. Call or contact us online today.