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Mini-cast 69: ESOP Participants and Plan Information

ESOP companies must provide participants (including current and former employees) certain information including an annual account statement and Summary Plan Description. We visit our archives for a brief discussion with Bret Keisling, Rich Heeter, and Brian Keisling about participant disclosures, including why participants don’t receive the full valuation report.

You can find the full, original version of this episode with a full transcript in our archives: Episode 40: Your ESOP Questions Answered.


Mini-cast 69 Transcript

Brian Keisling: 00:03 Welcome to The ESOP Mini-cast. A great way to wrap up the week.

Bret Keisling: 00:14 Hello, my friends. Thank you for listening. My name is Bret Keisling and as it says on my business cards, I'm a passionate advocate for employee ownership. As this episode is being released on February 7th, 2020 many ESOP companies whose fiscal year ends December 31st is already well underway in the process of preparing their annual valuation. The initial step going on right now is to have company accountants finalize the year end statements for 2019 but it's also a good opportunity for companies to reach out to their trustee and through the trustee, the valuation advisor to set up a timeline for creating the annual valuation so that Participant Statements can be issued and ESOP Participant Meetings can be held if companies do that.

Bret Keisling: 01:05 Recently an ESOP participant reached out to me on social media and asked what information are ESOP participants entitled to have? It's a great question, and a timely question and I'm very fortunate. I was able to go to our archives at and we actually had answered this question on Episode 40 of The ESOP Podcast. Feel free to check out our archives if you have any questions or drop me a line on social media. But here we're going to excerpt Episode 40. It's a conversation between my former partner Rich Heeter at Cap Trustees and Brian Keisling when he was producer of the podcast. And we're going to talk about what information participants are required to be provided and Rich Heeter will share why the valuation report is usually not provided to participants. I hope you'll find this discussion helpful. If you have any topics of interest to you, please reach out on social media. You'll hear contact information at the end of the episode. With that. Here's Brian Keisling, Rich Heeter, and myself.

Brian Keisling: 02:15 Are there rules for the minimum amount of information that management has to share with employee owners?

Rich Heeter: 02:21 That's a very good question, and we do hear that an awful lot from companies and participants. So there are basic minimum guidelines that the Department of Labor and the IRS say that must be provided to participants at least once a year. And those are things like you have to provide an annual statement of a participant's account indicating what the beginning balance in their account was, what has transpired during the year, any transactions during that account and the updated price of the shares that are held in their account for them. So that's requirement number one, the second requirement. And quite honestly, there's, there's really only two requirements that are mandated and that is the second one is that you have to provide the participants at a plan level a statement of the plan's account. So: total assets, total liabilities, total distributions paid during the course of the year. And that gets filed as part of the Form 5500.

Bret Keisling: 03:48 And Rich, on the Form 5500. Those are publicly accessible for any company.

Rich Heeter: 03:52 Absolutely.

Bret Keisling: 03:52 And the 5500s - Brian, you've done research on the 5500s, they cover any qualified retirement plan?

Brian Keisling: 04:00 Yeah, they, the most often that I see it usually covers either an employee stock ownership plan or a 401K.

Rich Heeter: 04:08 And obviously, being in the retirement plan arena with ESOPs those are the things that we see most often, but it actually pertains to health and welfare benefit plans - there's a whole list of things that are required. So for example, if you have a defined benefit plan or a profit sharing plan, those all have a 5500 form filing requirements.

Bret Keisling: 04:37 Brian, you're responsible at Capital Trustees for accessing the Form 5500. Where do you get them?

Brian Keisling: 04:44 I personally get them straight from the Department of Labor website, but you can also get them from or

Bret Keisling: 04:52 Excellent. So Rich, you've covered the two things that are required on an annual basis. Is there anything else the participants are entitled to?

Rich Heeter: 05:00 Sure. they are entitled to a copy of the summary plan description that must be provided to them. Usually upon enrollment and any time that there's a material change to the to the planner, to the documents, and they're also entitled to a copy of the actual plan document itself. Generally that's in, you know, you have to request that that's not something that the employer typically provides to everybody, but if they if they receive a request for it, they have to provide it.

Brian Keisling: 05:40 Okay. So that covers what a company is required to share with participants, but are they allowed to share more than what's required?

Bret Keisling: 05:47 Oh, absolutely. Brian. And there are a number of conversations and presentations at conferences regarding open book management, how much information to share, and that's a little bit of a different subject. That's kind of a management tool and speaks to culture and communication. So a company could share everything if they chose, but we wanted to focus on what they're legally required to share. And Rich a participant goes in and says, "Hey, I'd like the Summary Plan Description," or, "I'd like one of the other documents," that they're entitled to, the company should provide that. Is it a little bit different, every so often companies informed that a participant wants something via letter from participant's attorney. Does that change the company's thinking at all?

Rich Heeter: 06:34 Yeah. I think anytime the word attorney comes into play, it certainly rises to a different level and you have to, you know, look at what's the reason it's being requested, what are they looking for, why are they looking for it? You know, a lot of times we'll see a question be asked that a participant wants a copy of the valuation report. I think that's probably the most common document that gets asked for and that does not get shared with a participant.

Brian Keisling: 07:22 Why not?

Rich Heeter: 07:22 Because first of all, it is the trustees' valuation report. It was prepared solely for the purpose of the trustee to analyze the value. It's not the company's report, it's not their report to give to a participant. And there's a number of, it's only one part of a, one tool that's used by the trustee on determining valuation rear and I think there's a lot of information in it that would either be, could be misinterpreted and misunderstood. You know, it's not the average participant is not a valuation expert. So, it's just not as a normal course released to somebody.

Bret Keisling: 08:15 As we bring this episode to a close, I invite you to visit, we have a search feature there. You may find questions already answered in previous episodes, but if you have a question, by all means, reach out on social media. We'd love to discuss any of the issues that are important to you. With that, my friends, thank you for listening. This is Bret Keisling. Have a great day.

Bitsy McCann: 08:40 We'd love to hear from you! To contact us, find us on Facebook at KEISOP, LLC and on Twitter @ESOPPodcast. To reach Bret, with one "T", email, on LinkedIn at Bret Keisling, and most actively on Twitter at @EO_Bret. Again, that's one "T". This podcast has been produced by The KEISOP Group, technical assistance provided by Third Circle, Inc. and BitsyPlus Design. Original music composed by Max Keisling, archival podcast material edited and produced by Brian Keisling, and I'm Bitsy McCann.

Standard Disclaimer: The views expressed herein are my own and don't represent those of my own firms or the organizations to which I belong. Nothing in the podcast should be construed as guidance or advice of any kind in any field and the fact that I mentioned an organizational website or an advocate or a company on a podcast does not reflect an endorsement, but if you've heard your name or your group's name mentioned on this podcast, I'd love to have you come on and talk about it yourself.


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