CSG in the News - Spring 2023

A pair of national publications featured our experts in stories covering ESOP tax benefits and "top hat" retirement plans. CSG's founder, Larry Kaplan, also headlined new podcasts hosted by leading wealth management and business advisors. Read ahead for excerpts, links, and full recordings.

Bloomberg Features Lawrence Kaplan

My introduction to employee stock ownership plans was an accident. In the late ’90s, I was working in the consulting group of a large regional CPA firm, and Bill Blass’ namesake company was a client. Blass had agreed to sell the company, and my firm valued the company’s intellectual property. As part of the engagement, I learned that an employee stock ownership trust was among the shareholders.

I knew nothing about ESOPs at the time, but the concept fascinated me. Most people only thought of these defined contribution plans as employee benefit tools. I realized that an ESOP could also be leveraged as a corporate finance tool to achieve shareholder liquidity. In terms of stakeholder alignment, it was a unicorn.

Kaplan's full article is available on Bloomberg Tax.

MarketWatch Quotes Steve Golden

CEOs and Other Top Execs are Saving Billions with ‘Top Hat’ Retirement Plans

One major potential detriment is that these holdings are not protected from creditors, as 401(k) funds would be. “If the company goes bankrupt, you’re out of luck,” says Steven Golden, managing director at CSG Partners, an investment bank based in New York. “Most people don’t think of the worst-case scenario, but honestly, it would cause me anxiety. In some cases, it’s a lot of money.”

Golden also points out that top-hat plans merely delay taxes, they don’t erase the obligation. “You’re better off getting the money up front and investing it after tax, just to protect that part,” he says. 

The complete article is available on MarketWatch.

Thought Leader Magazine Interviews Lawrence Kaplan

The Power of Employee Ownership

"In recent years, with the hiring shortages that have basically affected every industry in the United States, companies are looking for edge," notes Kaplan. "They're looking for something that other companies don't have to make them different. One form of edge is having employees own the company through the ESOP."

"The ESOP costs employees nothing," Kaplan adds. "Employees get those shares into their accounts over many years. Shares are usually allocated over 15-20 years. So, every year, an employee is getting stock on the company. The longer that employee works at the company, the more stock they receive. The higher their total compensation, the more stock they receive. ESOP formations can be life changing events for these employees."

Kaplan's full interview is available on Thought Leader Magazine.

Financial Sense Interviews Lawrence Kaplan

"Under section 1042 of the US tax code – a section that was specifically put in place for ESOPs – if you're a C corporation, and you sell your stock to an ESOP, if you reinvest those sale proceeds in a qualified replacement property (stocks and bonds in a US operating company), you can defer paying capital gains taxes as long as your hold that replacement property."

Kaplan adds, "If you hold that property until your death, you'll get a step up in basis and you'll never pay the tax."

Kaplan's full interview is available on Financial Sense.