McDonald Hopkins' Jason Faust featured in WCPO's investigative report


Jason Faust, counsel in the Tax and Benefits Practice Group and Business Department, explained the rules and stipulations of Employee Stock Ownership Plans to Cincinnati's WCPO reporter Dan Monk.

The report, which aired Monday evening, surrounds Monk's investigation into a Cincinnati-based company that allegedly withheld ESOP payments to a deceased worker's daughter.

Faust, who has no involvement in the case but was sought out for his vast knowledge on ESOP, explained the regulation and legality of transferring the ESOP to a deceased worker's beneficiary.

An excerpt from the web story is below.

"ESOP shares are held by a trust that uses company contributions and loans to buy and sell company shares, said Jason Faust, a Chicago-based attorney who advises companies on ESOPs at the McDonald Hopkins law firm. But ESOPs are not like 401(k) plans, which give employees control over their retirement investments.

“It’s basically a notional account,” Faust said. “When John Smith retires, John Smith has 10 ESOP shares. When he’s entitled to a distribution, then we find the cash to pay John Smith the value of his 10 shares.”

When an employee leaves the company, federal rules allow companies to buy back shares over five years. If loans were used to acquire shares, pay outs can take longer, Faust said. But those rules don’t apply if plan documents specify otherwise.

“Payments are always subject to the legal, governing plan document,” Faust said. “They have to be paid according to that schedule and the company’s got to find a way to do it. And if it’s not, then you’re talking breaches of fiduciary duty. It’s just blatantly, blatantly illegal to not pay benefits when they’re otherwise due.”

For the full digital article and video, click here.

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