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ESOPs by Scott D Miller

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Chapter 2

Significant Events and Organizations

Since their inception, a wide range of creative uses and applications of employee stock ownership plans (ESOPs) has evolved. The strong tax incentives have always been an attraction. With time, the area of ESOPs has become significantly more documented, subject to increasing levels of regulation and complexity. A number of benchmark events and organizations, from both government and industry, have a significant impact on ESOPs, and this chapter identifies those elements.

Regulations and Government Agencies

Employee Retirement Income Security Act of 1974

The passage of the Employee Retirement Income Security Act of 1974 (ERISA) marked a significant event. The retirement of working Americans until that point was typically dependent on Social Security benefits, personal savings, and pensions. Although few smaller or closely held companies sponsored pensions, they were fairly common in larger publicly held companies. A number of high-profile scandals and fraudulent activities threatened to shake the foundation of the private sector retirement system of the United States. In response to the crises, the federal government enacted wide-ranging and powerful legislation that is referred to as ERISA.

ERISA is intended to provide security and integrity to the retirement system of this country. The act protects the interests of participants in employee benefit plans by mandating a number of measures, including standards of conduct, responsibilities, ...

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