【正文】 Pros and Cons of Internal vs. External ESOP Trustees—Post Enron GreatBanc Trust Company 45 Rockefeller Plaza, Suite 2056 New York, NY 101112022 Karen Bonn, Vice President (212) 3323251 2 Trustee must act: ? Solely in the interest of participants and beneficiaries。 ? For the exclusive purpose of providing benefits and defraying expenses of administering the plan。 ? With the care, skill, prudence and due diligence, which under the circumstances, a prudent man would act in similar circumstances。 and ? In accordance with the plan, as long as the plan and trust are consistent with ERISA 3 Prudence Duty ? Courts likely to defer to the judgment of an independent and experienced trustee unless the trustee acted in an ―arbitrary or capricious‖ manner ? Procedural diligence, not substantive perfection ? Avoid acting in an ―arbitrary or capricious‖ manner – Trustee is familiar with plan documents and applicable legal standards – Trustee relies on plan documents and applicable legal standards – Trustee documents diligence, reasoning and decisions 4 Liability for Another Fiduciary ? May not delegate fiduciary duties, but plan may allocate duties among separate fiduciaries ? Except in ―aiding and abetting‖ situations, fiduciary not liable for breach by cofiduciary of allocated responsibilities ? Knowing participation in, or concealment of, an act or omission known to be a breach ? Enabling another fiduciary to breach by breaching one’s own fiduciary duty 5 Liability for Another Fiduciary (cont.) ? Knowing of a breach and failing to make reasonable efforts to remedy the breach ? Basic principle: silence in the face of a breach is not acceptable ―reasonable efforts‖ to remedy the breach are required 6 Duties of the Trustee ? Analyze proposed transactions ? Vote employer securities ? Diversification ? Annual valuation ? Communications 7 Analysis of Proposed Transaction ? Independently negotiate price and terms on behalf of participants ? Investigate solvency of the corporation ? Engage in a diligent, independent investigation ? Engage advisors and scrutinize findings 8 Voting Employer Securities ? May follow directions to the extent doing so does not violate ERISA ? Trustee fiduciary responsibilities may not be delegated ? Follow plan document 9 Electing Board of Directors ? Review biographies ? Interview members ? Draft letter to participants requesting direction ? Count the vote and report results ? Maintain confidentiality 10 Diversification ? ESOP trustees not held to same diversification requirements as other plan fiduciaries ? Congress carved out an exception for ESOP fiduciaries ? Deciding to sell pany stock 11 Annual Valuation ? Assets of trust must be valued at least annually ? Trustee establishes value ? Financial Advisor reports to the trustee not the Company 12 Annual Valuation ? Examine methodology ? Question assumptions ? Understand conclusion ? High value。 low value。 FMV 13 Communications ? Trustee must keep accurate detailed records ? Trustee must submit an annual report to the pany ? Trustee must prepare and submit Schedule P for Form 5500 14 Directed Fiduciary ? Directed by internal ESOP mittee ? Directions must be ―proper‖ ? Overriding ERISA fiduciary duty ? Determine whether a conflict of interest exists 15 Recent Developments for Fiduciaries ? Amsted Case ? Champlain Enterprises Case ? Enron Litigation ? IRS Audit Guidelines ? Department of Labor Interpretive Bulletin 1