The National Center for Employee Ownership (NCEO) reports that the bill would:
allow owners of stock in an S corporation to have the
same opportunity as owners of C corporation stock currently have to
defer taxation on gains made from the sale to a qualifying Employee
Stock Ownership Plans (ESOP)
permit lenders to S corporations with 50% or more
ownership through an ESOP to exclude 50% of the interest from the loan
if used to acquire stock for the ESOP
set up an office in the Department of the Treasury to provide technical assistance to S corporations with ESOPs
provide that companies that are 50% or more owned by an
ESOP that were previously qualified under one of the various Small
Business Administration set-aside programs (the most important of these
are for minority- and woman-owned companies) to continue to qualify if,
after the ESOP gaining 50% or more ownership, the workforce remains
substantially the same
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In its report, “Employee Benefit Plan Auditing and Financial Reporting Models,” the Council explained that with the
Employee Retirement Income Security Act’s authorization of the limited
scope audit, a plan administrator may choose to have the plan audited in
a manner that would not otherwise be consistent with Generally Accepted
Accounting Standards (GAAS).
The limited scope audit allows plan
administrators to instruct the auditor not to perform any auditing
procedures with respect to investment information prepared and certified
by a bank or similar institution or by an insurance carrier that is
regulated, supervised, and subject to periodic examination by a state or
federal agency and that holds plan assets. Proper certifications must
address both the accuracy and the completeness of the information
submitted.
Concerns were raised by those that testified before the
Council that limited scope audits are not well understood by some users,
and perhaps misunderstood by some auditors as well, and that they might be employed in
inappropriate situations.
The report said potential misunderstandings relate to:
What is covered by a limited scope audit
What entities can offer asset certifications
The significance of the certifications with regard to asset valuation and the audit
What is the importance of a limited scope audit
The Council concluded that the limited scope audit should
not be repealed, but the quality of the limited scope audits and the
required certifications should be reinforced and strengthened. The
primary rationale for the Council's conclusion that the limited scope
audit should not be repealed was a deficiency of specific material
evidence of participant harm caused by limited scope audits and the
concern for possible increased costs that could result from a full scope
audit.
Witnesses expressed concern about entities – such as
retirement plan recordkeepers – that issue limited scope certifications,
but who in reality might not be the kinds of entities that should issue
certifications.
The Council recommended that:
The Department of Labor should clarify the kinds of
entities that are qualified to issue certifications under existing
regulations and guidance and reiterate that only qualified entities may
issue certifications;
The Department should amend the limited scope audit
regulations to require that the certification of investment information
include a disclaimer that investment values may not have been subject to
independent verification of fair value by the certifier;
The Department should require plan administrators to
include any certification issued in connection with a limited scope
audit in the plan's Form 5500 filing or other annual report; and
The Department should issue informal education materials
targeted to plan sponsors and plan auditors that would assist them in
understanding their respective obligations with respect to limited scope
audits.