The ESOP Association’s New Orleans Professionals Conference

By James Colligan

French Quarter, New Orleans

On February 17 of this year, the ESOP Association held a Forum for ESOP Professionals at the Ritz Carlton in New Orleans, La. The forum played host to approximately 100 of the top professionals from across the nation and was held to promote discussion of the current climate of the ESOP community as well as key issues facing it. Attendees hailed from all arenas of the ESOP industry and included lawyers, lenders, ESOP administrators, consultants, and valuation experts. The group comprised a robust cross section of seasoned ESOP professionals and vigorous discussion ensued throughout the day.

As only service professionals were invited to the “invitation only” event rather than the usual mix of executives or employees of ESOP companies, efforts were focused on a discussion of best practices without the usual marketing influence. Six different discussions were conducted throughout the day, each helmed by a chair of an ESOP Association advisory committee. Topics spanned the gamut of relevant ESOP issues including styles of ESOP communication, legal and regulatory compliance, valuation, administration, and independent fiduciaries. Healthy discussion and debate arose with each new topic as attendees traded anecdotes, advice and opinion from their respective realms of expertise.

During the hour-long lunch, the president of the ESOP Association, J. Michael Keeling addressed attendees updating them on the state of relations between the ESOP community and pertinent governmental agencies. Steeped in historical perspective, Keeling’s speech touched on the uniqueness of ESOP legislation and recounted the unconventional means by which it found its way into ERISA. He cited the unconventionality of the nature of ESOP legislation as a primary driver of the skepticism from which many Department of Labor (DOL) employees view ESOPs and discussed the ways the community must engage with regulators in order to hold onto the many advantages of these sorts of plans.

In that regard, much of the day’s discussion concerned the DOL’s recent stances and attendees’ personal dealings with the agency. Nearly a dozen individuals shared anecdotes of their dealings with DOL agents, and the difficulties they had in convincing the regulators to see the value in these programs — the significant value we all have learned to take for granted as a result of our experience with ESOP companies. The overall message was that we cannot take for granted that the government will automatically agree that ESOPs are good for the country. In fact, we must understand that many regulators believe quite the opposite. Overall, the professionals shared experience of current investigations that are being conducted by the DOL along with advice on what to expect from, and how to deal with DOL’s requirements.

The most compelling part of the day for this new ESOP consultant was regarding the DOL’s recent proposal to expand the definition of “fiduciary” to include almost any professional who advises a fiduciary (including the appraiser) as a fiduciary. This seems to be the most significant threat facing the professional ESOP community since ERISA’s inception as it will imply not only a significant increase in fees associated with this important feature of the plans, but it also will force many competent professionals out of the business altogether. This is not an issue that can be taken lightly, according to Keeling, it is an issue that must be addressed directly and decisively by everyone interested in promoting employee ownership through ESOPs.

The forum was a success by any measure. Throughout the day, an extremely high level of discussion ensued reflecting the immense collective expertise congregated in the ballroom. It was evident from the passionate opinion offered in both large group discussions and the countless asides which punctuated the proceedings that these professionals know and shared a great deal about the current climate of the ESOP community, the challenges facing it and how best to prepare for them. The ESOP Association is wise to reprise this as an annual event at which the best and brightest of the ESOP advisors can explore and address pressing issues impacting the ESOP community.

In an interesting turn of events, it was pointed out more than once that this “new” meeting is actually the rebirth of what the technical seminar now held each year in Las Vegas was originally intended to be — a forum in which professionals can compare notes and develop a common understanding of complex ESOP issues. And it was also great fun to participate.

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