The document provides an overview of the fiduciary duties of ERISA trustees. It discusses that under ERISA, trustees must discharge their duties solely in the interests of plan participants, for the exclusive purpose of providing benefits. It also notes they must act with reasonable care, skill, and diligence. The document then discusses directed and discretionary trustees, determining the fair market value of employer stock, voting shares, electing board members, and other general and uncommon trustee duties and activities under ERISA.

1. Review Of The Trustees’ Duties
Under ERISA
Patrick J. De Craene
GreatBancTrust Company
Michael R. Holzman
Dickinson Wright
ChristopherT. Horner
Dickinson Wright

2. By Law (ERISA)
• Fiduciary duties under ERISA Section 404(a)
• A fiduciary must discharge its duties:
• Solely in the interests of the participants and
beneficiaries
• For the exclusive purpose of providing benefits
and defraying reasonable expenses of
administering the plan
• With the care, skill, prudence, and diligence
under the then prevailing circumstances that a
prudent man acting in a like capacity would use
• In accordance with the documents and
instruments governing the plan and ERISA

3. By Law (ERISA)
Employee Retirement Income Security Act of 1974, as amended (“ERISA”):
1. Generally, ERISA requires that the assets of an employee benefit plan,
including an employee stock ownership plan, be held in trust by one
or more trustees. ERISA §403(a).
2. The trustee must be either named in a trust instrument or in the plan
instrument or appointed by a person who is a named fiduciary.
ERISA §403(a).
3. Once the trustee accepts its appointment, the trustee enjoys exclusive
authority and discretion to manage and control the assets of the
plan, except…

4. By Law (ERISA)
1. Directed Trustee. If the plan instrument expressly provides that the
trustee is subject to the direction of a named fiduciary who is not a
trustee, in which case the trustees shall be subject to proper directions of
such fiduciary which are made in accordance with the terms of the plan
and which are not contrary to ERISA, see ERISA §403(a); or
2. Investment Manager. if authority to manage, acquire, or dispose of
assets of the plan is delegated to one or more investment managers.
ERISA §403(a).

5. DoYou Have What It Takes to Be An
ESOP Trustee?
ERISA charges an ESOP fiduciary with performing its obligations with
the care, skill, prudence, and diligence under the circumstances then
prevailing that a prudent man acting in a like capacity and familiar with
such matters would use in the conduct of an enterprise of a like
character and with like aims. ERISA §404(a)(1)(B).
Quite often, an ESOP trustee is charged with determining the fair
market value of employer securities. Are you “financially literate”? Are
you familiar with financial reporting, financial statement analysis, and
appraisals of assets and equity?

6. DoYou Qualify To Serve As An
ESOP Trustee?
No person who has been convicted of, or has been
imprisoned as a result of his conviction of, robbery,
bribery, extortion, embezzlement, fraud, grand larceny,
burglary, arson, a felony violation of Federal or State law
involving substances defined in section 802 (6) of title 21,
murder, rape, kidnaping, perjury, assault with intent to
kill…any felony involving abuse or misuse of such person’s
position or employment in a labor organization or
employee benefit plan to seek or obtain an illegal gain at
the expense of the members of the labor organization or
the beneficiaries of the employee benefit plan, or
conspiracy to commit any such crimes or attempt to
commit any such crimes, or a crime in which any of the
foregoing crimes is an element, shall serve or be
permitted to serve as an ESOP fiduciary. ERISA §411(a).

7. Activities
 Determining value of Company
Stock
 Voting Employer Stock
 Electing Board of Directors
 Other General Duties
 Long-term Analysis of ESOP

8. Determining theValue of Company
Stock
 SORRY……This will be covered in a separate
session on Friday morning

9. Determining theValue of Company
Stock
United States Department of Labor Proposed Regulation
2510.3-18(b).
1. ERISA defines the term “adequate consideration” to
mean “the fair market value of the asset as determined in
good faith by the trustee or named fiduciary pursuant to
the terms of the plan and in accordance with regulations
promulgated by the Secretary.” ERISA 3(18)(B).
2. The proposed regulation expands on this definition:
a) First, the value assigned to an asset must reflect its fair market
value as determined pursuant to proposed §2510.3-18(b)(2) .
b)Second, the value assigned to an asset must be the product of a
determination made by the fiduciary in good faith as defined in
proposed §2510.3-18(b)(3) .

10. Determining theValue of Company
Stock
 Seven DOL “hot topics” when purchasing or selling employer securities
1. Independence of the financial advisor
2. Understanding the financials
3. Question the reasonableness of projections
4. Understand the comparison to public companies
5. Identify and question underlying assumptions
6. Consistency between conclusions and data analysis
7. DOCUMENTYOUR PROCESS

11. Voting Employer Stock
1. DiscretionaryTrustee vs. Directed Trustee
2. Evaluating Propriety ofVoting Directives
3. ParticipantVote Pass Through Code Section 409(e)(3)

12. Voting Employer Stock
 Events under Section 409(e)
◦ Merger, Consolidation, Recapitalization,
Reclassification, Liquidation, Dissolution, Sale of
substantially all of the assets

13. Electing the Board of Directors
 Follow plan voting provisions (e.g.,“pass
through” and directed vs discretionary)
 Knowledge of the nominated slate
 Internal vs External Directors
 Trustee Seat
 Removal of a Director

14. Other General Duties
• Understand the terms of the plan and approved policies
• Understand operational administrative forms
• Properly Account For Contributions, Dividends, and
Distributions;
• Properly Remit Payments of Principal and Interest to
Amortize Exempt Loan
• Coordinate withTPA to Accurately Document
Number of Shares Released and Allocated
• Review executive comp arrangements and identify
any concerns (e.g., dilution)

15. “Uncommon” Duties
1. Sale of Sponsor toThird Party Buyer;
1. Applicability of Adequate Consideration Exemption from Prohibited
Transaction Rules. ERISA 406(a)(1)(A); ERISA 408(e)(1); ERISA 2(14)
(definition of “Party In Interest”).
2. CorporateTransactions AffectingValue of Employer Securities
1. Stock Redemptions;
2. Repurchase Obligation; and
3. Synthetic Equity Awards.
3. Special Fiduciary Overseeing Civil Litigation.
1. SuccessorTrustee Liability. ERISA 409(b); ERISA 405(a)(3).

16. “Uncommon” Duties
1. SuccessorTrustee Review of PredecessorTrustee;
1. No fiduciary shall be liable with respect to a breach of fiduciary
duty if such breach was committed before he became a fiduciary or
after he ceased to be a fiduciary. ERISA 409(b);
2. A fiduciary shall be liable for a breach of fiduciary responsibility of
another fiduciary with respect to the same plan…if he has
knolwedge of a breach by such other fiduciary, unless he makes
reasonable efforts under the circumstnaces to remedy the breach.
ERISA 405(a)(3);
3. DOL Advisory Opinion 76-96; DOL Advisory Opinion 77-79; and
DOL Advisory Opinion 77-80A.
2. Monitoring Co-Fiduciaries;
1. Knowingly Participates in or Conceals Fiduciary Breach;
2. Own Fiduciary Breach Enables Another Fiduciary’s Breach; and
3. Knowledge of a Breach and Fails to Take Reasonable Efforts to
Remedy. ERISA 405(a).

17. Long Term Analysis of the ESOP
 Monitor ESOP repurchase liability
 Examine the sustainability of the ESOP
 Evaluate plan design changes
 Collaborate with other ESOP
professionals
 Investment of non-employer
securities
 Review and payment of plan expenses

18. Thank you !
Patrick J. De Craene, GreatBancTrust Company
Office: 630-810-4528
Email: pdecraene@greatbanctrust.com
Michael R. Holzman, DickinsonWright
Office: 202-659-6931
Email: mholzman@dickinsonwright.com
ChristopherT. Horner, DickinsonWright
Office: 202-659-6961
Email: chorner@dickinsonwright.com