FIDUCIARY SERVICES, INC.
ESOP Trustee

We provide independent trustee, fiduciary and investment management services for qualified retirement plans including Employee Stock Ownership Plans (ESOPs). This service is also frequently referred to as an ERISA fiduciary, ESOP fiduciary, ESOP trustee, ESOP Independent fiduciary, ERISA trustee and Expert Witness for these services.

Our Services

ESOP Trustee

An independent trustee for ESOPs is the principal fiduciary decision maker for an ESOP purchase (from founder/owners) or sale transaction (to strategic buyer or private equity, etc.). The trustee also administers the trust post-transaction in charge of annual valuation, custody and shareholder meeting voting.

Independent Fiduciary

An independent fiduciary can be appointed to a qualified retirement plan including ESOPs in order to carry out the decisions listed under ESOP Trustee. This allows the company as plan sponsor to maintain internal trustees but have the benefit of a qualified, experienced professional handle various discretionary duties and direct the trustee(s).

Retirement Plan Trustee

For any qualified retirement plan where a trustee is required, Fiduciary Services, Inc. can fill the role and carry out the trustee duties as prescribed by ERISA and the subject plan. Fiduciary Services, Inc. as a registered investment advisor can manage investments and select appropriate portfolios for defined contribution as well as defined benefit plans.

Fiduciary Services provides superior skill and expertise

Fiduciary Services provides superior skill and expertise where an independent trustee, fiduciary or investment manager is needed to make evaluations and final decisions on behalf of retirement plans, including those plans with company stock. In the case of ESOPs, the need is especially acute where capital changes or ownership transitions are being anticipated at the company that will affect the plan participants.

Philosophy

The independent trustee, fiduciary is usually brought in to make determinations on behalf of the plan participants that the internal plan trustee is not comfortable making. This is due either to the need to avoid the appearance of a conflict of interest in the case of the plan trustee, who may also be an officer/director or shareholder of the company, or in some cases due to the need for a higher level of expertise on the part of the current trustee.

Why Us?

In recent years we have all read and heard news about a proliferation of employee retirement plan litigation leveling charges against internal trustees, plan committees as well as a company's officers and directors. These law suits and regulatory actions allege conflicts of interest and failure to take appropriate actions against these parties. Conclusions coming out of these cases make it clear that when important fiduciary decisions on behalf of plan participants need to be made, an independent fiduciary can be a critical element to avoid liability for those parties.

“Fiduciary Services, Inc is always striving to provide superior skill and expertise”

DANIEL M. RESER, JD, CCTS
President, Investment Counsel

Frequently Asked Questions

For What Purpose and when is an Independent ESOP Trustee or Fiduciary Needed?

When a company executive or significant shareholder, who is also a current trustee or fiduciary of a retirement plan, is considering a capital change that affects the shares of stock in the ESOP or other qualified plan then an independent fiduciary is a critical consideration. Common examples of such capital changes are purchases or sale of company stock from or to a plan.

The independent trustee, fiduciary can protect the current ESOP fiduciary by taking on the role of the decision maker. This entry of an independent trustee or fiduciary provides a safe harbor to the executive from violations of the federal law standard business judgment rule, conflicts of interest, prohibited transactions and/or charges of uninformed decision-making.

Then, after the review and decision is made by the independent fiduciary, the executive can resume their role as trustee or fiduciary. This gives necessary protection to current plan fiduciaries who are also company executives without requiring the intervention and long term added expense of a permanent trustee/fiduciary replacement.

For What Types of Transactions is an Independent Trustee or Fiduciary Called In?

Fiduciary Services, Inc. acts as an independent trustee, fiduciary for employee benefit plans that hold stock of the plan sponsor. In this role we are often called on to review and give an opinion on the fairness of the purchase price of company stock at the time of Plan Formation or the price upon a sale of stock in the event of Plan Termination. Other types of events occurring at the company that may require these review and decision making services are:

Mergers and Acquisitions
Restructuring of capital and/or debt of the company
Spin-offs
Recapitalization
Pass-through voting
Tender offers
Leveraged, un-leveraged and multi-investor ESOP buy-outs
Hybrid securities

What Role and Responsibilities Does the Independent Trustee or Fiduciary Perform?

In all these situations Fiduciary Services, as the independent trustee fiduciary, makes decisions for the purpose of protecting the interests of the plan participants and beneficiaries. This is particularly important and needed where inherent conflicts of interest exist between management and plan participants. The roles and responsibilities of the independent fiduciary are spelled out below:

Determine the fair market value of the company.s shares
Evaluate the transaction from a financial point of view
Advise the fiduciary during negotiations and structuring of the transaction
Render the necessary opinions of fair market value and fairness from a financial point of view and provide suitable documentation for such opinions

Documentation of the opinions is important. The relevant factors in reaching the conclusion of adequate value and fairness must be carefully spelled out and given support.

What is the Legal Basis of the Need for an Independent Trustee or Fiduciary?

Under federal law called ERISA plan fiduciaries must make important decisions regarding the plan assets in a prudent manner and solely in the interest of and for the exclusive benefit of the plan participants and their beneficiaries. If the transaction is between an ESOP and a party in interest, the ESOP must receive adequate consideration for its stock in order to avoid a prohibited transaction. A transaction between an ESOP and either a plan sponsor or a party in interest (such as an employer, officer, director or a shareholder owning more than 10of the company.s stock) is a prohibited transaction.

The transaction may not go through in the case of a prohibited transaction without the threat of reversal and payment of penalties to the federal government unless the transaction meets a statutory exemption. To qualify for an exemption the ESOP may receive no less than adequate consideration for the securities it buys or sells. The Department of Labor.s proposed regulation 2510.318(b) defines the term adequate consideration as the fair market value of the asset or security as determined in good faith by the trustee or named fiduciary.

What Qualities Should be Sought When Selecting an Independent Trustee or Fiduciary?