Employer Securities


There are a number of instances where an independent fiduciary can play a critical role in the management of employer securities or other related-party assets contributed to and held in benefit plans. In some cases we are retained to represent the interests of plan participants with regard to employer securities held in the plan to avoid any real or potential conflict of interest between management who often serve as named fiduciaries for the plans, and the participants. In other cases, we are retained to meet the requirements of the Department of Labor (DOL) for certain types of transactions.

Company Stock Held in Defined Contribution Plans

As independent fiduciary of a company stock fund in a 401(k) plan, Fiduciary Counselors is typically appointed as a named fiduciary and investment manager with respect to the stock fund. Fiduciary Counselors’ responsibilities typically include:

  • Monitoring the company’s financial condition to determine whether permitting participants to make new investments in company stock is no longer consistent with ERISA;
  • Determining whether holding company stock in the Plans is no longer consistent with ERISA and, if so, determining how to liquidate the Plan’s holdings in company stock;
  • Acting on behalf of the Plan to protect the interests of investors in the company stock fund in any bankruptcy or insolvency proceeding; and
  • Proxy voting for unallocated shares and shares for which no participant direction is received.

In performing our services as an independent fiduciary, we would act in accordance with the terms of the plan, including the plan’s provisions relating to investment in company stock, unless doing so would be inconsistent with Title I of ERISA.

We manage funds that hold employer stock of companies ranging from high investment-grade to non-investment grade. We have expertise and experience in managing the company stock of troubled companies and companies in bankruptcy.

We currently manage over $18.5 billion in company stock for defined contribution plans.

Company Stock Held in Defined Benefit Plans

We believe that holdings in employer stock can be appropriate subject to certain limitations. Ordinarily, Department of Labor regulations limit the holding of employer securities to 10% of fund assets. A fund’s investment policy statement may have additional restrictions. Fiduciary Counselors manages employer stock positions over time to ensure that the fund benefits from its holding and to allow for appropriate diversification of assets.

Fiduciary Counselors can be retained to determine if accepting a contribution of employer securities is in the best interests of plan participants or to manage an existing position. Factors used in determining whether to accept, continue to maintain or sell company stock holdings are:

  • Financial condition of the company
  • Credit ratings or credit metrics
  • Availability of timely, reliable company financial information
  • Various valuation measures and business fundamentals
  • Analyst expectations regarding earnings and stock performance
  • Company stock holdings as a percentage of pension plan assets

Fiduciary Counselors considers these factors as it tries to manage the plan’s exposure to company stock over time.

Prohibited Transaction Exemptions

We serve as independent fiduciary representing the interest of participants in situations where the contribution of company assets to a plan requires an exemption from the DOL. In so doing, our responsibilities include:

  • Determining whether the proposed contribution of company assets is in the best interests of participants;
  • Negotiating specific terms under which the contribution will be accepted;
  • Monitoring the performance of the assets and taking actions as appropriate;
  • Performing any other duties specified in the PTE.

Most often the contributed assets are common stock or real estate, but transactions may involve other assets. We have extensive experience in PTE transactions.

Real Estate Transactions

Providing fiduciary oversight of transactions among interested parties, determinations regarding valuation issues, and representation of client interests with regard to performing and distressed real estate assets.

Proxy Voting

We are retained to vote proxies in the best interests of plan participants or other holders of company stock for annual meetings or corporate transactions and other special situations. Engagements include the voting of un-voted shares in defined contribution plans, shares held in defined benefit plans, or shares held in various client accounts by financial institutions.

Liquidation of Stock Positions

In some instances we are retained for the sole purpose of managing the liquidation of securities held in a company’s benefit plan. This can include the liquidation of shares of the newly formed company received by a defined contribution plan due to a spin-off from the plan sponsor. It can also include the sale of shares of company stock held in a defined benefit plan in the open market or to the company itself.

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