Industry Insights

Key Takeaways from the 2016 ESCA Leadership Summit

March 2016
Author:  Cara Benningfield

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The 2016 Employee-Owned S Corporations of America (ESCA) Leadership Summit, held in February in Fort Lauderdale, Florida, was attended by 180 ESCA members and guests and covered many topics important to employee stock ownership plans (ESOP) as well as the results of a newly issued study on wage and wealth inequality in the United States.

The ESCA Advisory Council hosted a Q&A session with representatives from the U.S. Department of Labor and IRS, covering various topics that included transaction structures involving the exchange of ESOP and seller notes, re-leveraging transactions and corporate governance and control issues. Participants discussed and debated various plan administration questions.

ESCA Chairman Steve Smith opened the general session and introduced Sen. Richard Burr, chairman of the Senate Intelligence Committee and member of the Health, Education, Labor and Pensions Committee. Burr called on ESCA members to stay involved in current tax reform developments and emphasized the benefits of ESOPs, saying, “The S ESOP structure organically grows your business. Employees are not just invested in a job, but are invested in the growth of the business.”

ESCA Executive Director Stephanie Silverman also spoke on S ESOPs and the current political climate. Silverman indicated tax reform likely won’t occur in 2016 because of the upcoming presidential elections. However, she stressed ESCA members should continue to be proactive and speak with their representatives in Congress to protect the benefits of S ESOP status.

Jared Bernstein, Senior Fellow at the Center on Budget and Policy Priorities, shared the highlights of his new study, “Employee Ownership, ESOPs, Wealth, and Wages.” Released in January 2016, the study explores the relationships between ESOPs and the reduction of wage and wealth inequality in the United States. Bernstein concludes inequality in the American economy has grown, and wealth has become significantly more concentrated within a small group. According to the study, ESOPs can help reduce this inequality, but only less than 10 percent of U.S. employees participate in ESOPs, which limits the equalizing effects. Bernstein concludes the government should put in place additional incentives and resources to encourage the formation of ESOPs.

To learn more about issues affecting S ESOPs, contact your BKD advisor.

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