The goal of this paper is to provide a concise overview of Employee Stock Ownership Plan (ESOP) transactions in an understandable manner that provides practical and regulatory insights into successful installations. The paper is oriented to those CPAs serving as a financial adviser (FA), including valuation work, to the fiduciaries of the ESOP.

ESOP attractiveness was magnified with the 1997 federal legislation permitting S corporations to sponsor ESOPs. This created an opportunity for CPAs to provide services to their clients in the creation and administration of a successful ESOP.

This paper summarizes the material issues related to the installation and maintenance of ESOPs. There is a brief history of relevant events, a consideration of applicable federal regulations, an overview of ESOP valuation issues, typical transaction structures, practical success insights and a summary of practical considerations.

Included is a discussion of the Tax Cuts and Jobs Act tax law change in 2018. That change impacts tax adjustments to comparable publicly traded companies and the tax paid by beneficiaries of an ESOP, but has little effect on plan valuations and administration.

An update will be provided on the current enforcement activity by the Department of Labor (DOL) and the process agreements with the DOL that provide guidance on the ESOP fiduciary relationship with the FA to the ESOP.