Here is yet another reason why I am completely satisfied that Stephen Harper is the right choice for Prime Minister of Canada.
Remember, we are in the midst of a global recession where companies are shutting down, people being laid off and losing their homes…
… Except in Canada.
Statistics Canada reported today that 672,200 people received regular Employment Insurance benefits in July 2010, down 31,400 from June 2010.
That means people in Canada are finding work.
On the same day that NetFlix launched its product into Canada, Blockbuster announced it is filing for Chapter 11 (bankruptcy) in the United States. Can that filing be coming up in Canada too?
Is this not a case of out with the old and in with the new?
Blockbuster became obsolete years ago, around the same time record stores like Sam the Record Man, HMV and Sunrise began to realize they were no longer a viable option.
Well, pretty much everything, I think. Unless you are a die-hard tax person like us folks here at In-tax-icating, then you are going to click this link and run (don’t walk) over to You Tube to watch IRS videos…
You know you want to!
What happens if a company, that you work for, is in chapter 11 and the new owners want the ESOP plan terminated. The present value of the stock is $0. The stock is not publicly traded. There is some cash left in the cash accounts associated with each participants ESOP account. The trustee is using the cash for the ESOP termination costs. Is this legal or should the company be picking up the costs?
Well, in this case, the court has authorized the payments out of the participants cash funds. As well, if you refer to your plan specific documentation, you will probably find that the company is under no obligation to pay for any plan expenses and the Trustee can use the ESOP funds to pay for costs.
The question of whether plan assets can be used to pay the costs of plan termination is addressed in DOL Advisory Opinion 97-03A. It is a fiduciary question under ERISA (employee retirement income security act). and requires an analysis of the terms of the plan document and of whether the termination of the plan is for the benefit of the participants or the plan sponsor. The cash in the ESOP is not an asset in the bankruptcy estate of the employer. While 97-03A does not refer to ESOP’s it does mention tax qualified pension plans, which indicates that the plan pays for the termination, specifically, “Accordinly, reasonable expenses incurred in implementing a plan termination would generally be payable by the plan.”