Rick Pearl Provides Insight on ESOP Litigation With Bloomberg Law

Benefits and executive compensation partner Rick Pearl commented on Department of Labor compliance issues arising from employee stock ownership plans (ESOPs) with Bloomberg Law.

The publication noted that recent litigation has highlighted a need for guidance from the DOL and Internal Revenue Service on ESOP compliance, particularly in the confines of the Employee Retirement Income Security Act (ERISA). ESOP valuation follows ERISA’s statutory framework for appraising a plan’s stock based on fair market value “determined in good faith by a trustee,” which can be a difficult concept for lawyers and judges to grasp when litigating ESOP-related issues.

“Fair market value’ is a term of art that has a very specific meaning in the field of valuation,” Pearl said. “Courts have commonly departed from those rules and it makes it very difficult for people in the ESOP community to understand what complies and what doesn’t comply.”