Department of Labor's Timothy Hauser Comments on ESOPs

On April 14, 2016, Timothy Hauser of the US Department of Labor addressed the NCEO's annual conference. Hauser is the deputy assistant secretary for program operations at the Employee Benefits Security Administration (EBSA), and his responsibilities include overseeing EBSA's regulatory, enforcement, and reporting activities. This note is excerpted from a transcript of his remarks, which were not delivered from a prepared text. Members will receive a fuller version of his remarks in the July-August newsletter.

At events like this, I think it's important to celebrate what is unique about ESOPs: the transformational potential they have for empowering people and for improving the level of engagement and the level of satisfaction that people have at the workplace.

But it is just as important to recognize what is not unique about ESOPs. What isn't unique about them is that they are retirement plans. First and foremost from a Title I of ERISA standpoint, the purpose of an ESOP is to provide retirement benefits to people.

If there is one area of our enforcement program where we consistently see problems, it is in the appraisal context. We are more likely as an agency to find violations when we look at valuations in closely held companies than virtually any other category of financial transaction.

We can do better than these cases. We can do better if you can make sure that the plan is independent of the counterparty, if you make sure that the people looking at the appraisal look at it with a critical eye, if you make sure that the appraiser had the information he or she needed to do the job right.

In related news, the Department of Labor reached a settlement over alleged overvaluation of shares, resulting in an additional $3.47 million to the AIT Laboratories ESOP.