Of special significance herein is the question of why the question of why the tax-free rollover legislation was necessary in order to enhance the appeal of the ESOP. Public Law 93-369 reads, in part, that "Under the Act, a taxpayer may elect to defer recognition of gain on the sale of certain qualified securities to an employee stock ownership plan (ESOP) or to an eligible worker-owned cooperative to the extent that the taxpayer reinvests the proceeds in qualified replacement property within a replacement period."The Small Business Development Act of 1980, amending SBA rules to make SBA loan guarantees available to companies with employee ownership, inclusive of those with ESOPs The Employee Retirement Income Security Act (ERISA) significantly changed the area of private pension plans based on a social policy of encouraging employers to voluntarily provide retirement plans for their employees through tax-favored incentives. ERISA empowers the Labor Management Services Administration of the U.S. Department of Labor to enforce its provisions governing employers who have private pension funds for their employees. ERISA does not require an employee to establish a pension plan, but when a plan exists, ERISA establishes standards for its management. An administrator generally must file an annual report (Form 5500 Series) each year containing financial and other information concerning the operation of the plan. Plans with 100 or more participants file the Form 5500. Plans with fewer than 100 participants file the Form 5500-C/R; the form 5500-C at least every third year and the Form 5500-R, an abbreviated report, in the two intervening years. Plan administrators must furnish participants and beneficiaries with a summary of the information in the annual report. Participants tend to prefer to avoid receipt of dividend payments because there are greater advantages to reinvestment of dividends in the purchase of additional employer stock. Congress appea |
