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Suggest questionThis episode leverages the knowledge of an experienced ESOP insurance agent to help folks better understand the requirements for Fiduciary, D&O, EPL Insurance…Patrick is has an excellent way of keeping this part of the ESOP requirements straightforward so that they are easy to understand and plan for on your journey to an ESOP.
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<p><!--block-->[0:11] Hey everybody this is the ESOP guy we are on a journey to an ESOP and excited to be in season 4. <br> And you know continue to look at things that I think are helpful to you who are thinking about possibly doing an ESOP and so if this is a. <br> A new episode for you or your brand new to the podcast and you have an interest in learning more please go to our website at journey to an ESOP calm and you can find out. <br> From from really a lot of different episodes that we've kind of covered a lot of different ground. <br> Today we're going to want to dig deeper into the question of ESOP Insurance in general. <br> And that's not my expertise at all and in fact I get it but I don't get it you know it's something that is important so in order to make sure we have the right information for you we've invited, the right expert and that is Patrick Dixon with Murray insurance. <br> And Patrick's going to really help us today to kind of go through what what it's all about what is Insurance all about when do we need to be thinking about insurance and so we'll cover that in the podcast so hopefully that will be, helpful to you and as you start continue to on your journey and thinking through you know would an ESOP work for you. <br> <br> [1:26] So we've so as we start that I wanted to kind of introduce Patrick Patrick before I let you tell everybody about who you are tell us what your favorite movie of all time is. <br> In why. <br> <br> [1:42] And I didn't tell you this before so I'm kind of surprising that this question a long long thing cannot and Straight Out The Gate I really don't have. <br> An answer for you on that I really giving it too much thought so that's kind of, an ambiguous stop so let's let's have none let's do this okay so in in the category of action movies. <br> <br> [2:07] In your English so I'll throw out to you how what about Braveheart. <br> <br> [2:12] Well we know if they if they stick it to this gotta Stick it to the English they say they totally do that's why I was asking efficiently from. <br> Of West of England which is very close to Hadrian's Wall and the Scottish border there so yeah definitely have some Scottish Heritage so cool you know it's definitely good movie for sure but in terms of action movies Rock he's got to be up there hasn't it you kidding me lie as well. <br> Rocky's us I just literally Watch Rocky 3 last night because my daughter and I love watching all the Rocky movies and we're so weird we watch we just go back through them all, so we but yeah Rocky I mean so what that does is it tells everybody kind of about you you know who you are what you like so that kind of thing so I had to I had to throw out the Braveheart thing because I wasn't sure if you were Scottish or. <br> English so sorry about all that well the redhead my exactly yeah that's cool. <br> Definitely good movie cool so how did you get into like I know you're an insurance expert but how'd you get into the ESOP world how long you been part of the ESOP community. <br> <br> [3:19] So really I got involved in Insurance when I was in England I worked for a Lloyd broke doing errors and omissions insurance for Architects and engineers and miscellaneous miscellaneous you know, my wife who's originally from this area I'm kind of wanted to move back she got a bit homesick, and so I agree to move over here and my father-in-law actually combed the business ski and bike shop, I'm with a guy who actually own sakura-san Maria quiets curious so we kind of had a nice lead in for me to come to Murray here, and then it had in mind to me when I first started to help get Gilbert on the ESOP program, and slowly over there stop the last 7 years you know taking on his program manager now and had a great mentor along the way so. <br> <br> [4:14] Kind of soon as I joined Marie Bailey and you join a company that's an ESOP and you're like what's an ESOP so I kind of had The Learning Experience from both being in an ESOP but then also from being part of an insurance program which is cater towards directors and officers fiduciary liability Employment Practices liability, but for employee-owned company so it's definitely been a great journey and and having some great mentors along the way Mmm Yeah so for some people you might know the name Jeff Gilbert because we did a podcast with Jeff, and Patrick and I were talking about it might have been like 18 months ago and so there's obviously a lot of changes that have happened. <br> <br> [4:54] The Murray Insurance they've been involved with esops for just such a long time and I think Jeff was kind of one of the original. <br> <br> [5:02] Founding fathers I think you know in terms of intro time starts in 1989 I think back then it was with maybe Sedgwick and then it moved to Martian for last 15 years or so it's been with. <br> With Murray insurance and now we're part of the should Partners broken Network, it's been great Americans being a programming sure and now for 25 years so definitely some great heritage and the programs endorsed by the ESOP Association, as well in great Americans exclusive Insurance ESOP Association so death took some great Partners to work on its butt. <br> <br> [5:36] Excellent the reason I'm the reason Patrick's on the day is just because I'll just put a plug in for you right now and we get into an ESOP transaction and I'm like I'm dealing with a client who's like. <br> Talking to their insurance people about the particular insurance that we need which we're going to get into but we're right before closing and usually we're kind of scrambling to, get the binder for the insurance that's going to be needed and Patrick name comes up all the time and so it like you got to get on the podcast because realistically, experientially I mean he's coming to save the day so many different times and it's so he definitely is very good at it and I think the main issue that I see with ESOP insurance is that. <br> Not not because the insurance people that people work with don't know what they're doing it's just very nuanced. <br> And it's not super straightforward in terms of the not just the process but the actual what is it that we're going to get into like what insurance do you need when you when you do an ESOP company so. <br> So anyway that's your plug Patrick but maybe they'll be more as we go but if he really is phenomenal and he's super super responsive so, all the things you would ever really. <br> So let's talk about the different Insurance in you know the ESOP world so there is fiduciary there is dno and then there's the EPL so. <br> <br> [6:57] I guess the fiduciary is the most common from a from a transaction standpoint. <br> I'm always negotiating that there's going to be a fiduciary insurance policy every sub transaction the trustee is going to require a fiduciary policy so tell us what is a fiduciary policy in who does it benefit how does it really work and why is it really there. <br> <br> [7:18] So the fiduciary policy really is covering anybody internally who might be a fiduciary and it may even extend to it an external fiduciary trustee, so it really is covering any breach of Arisa and that they'd be something as severe as you know adequate consideration wasn't released on the only sub transaction there was no payment it could be internal fiduciaries and potentially external trustee no situations, or maybe just something as simple as that voluntary compliance issue with maybe not as administering the plan properly and maybe me needed to make a participant Hall in a plan, it might be denial benefit for a welfare fund for example so it runs the come up really old. <br> <br> [8:06] Welfare plans benefit plans within a company but it just so happens that it's really important for an ESOP company to maintain that coverage. <br> I mean it's it's usually required by the trustee in the transaction because. <br> They're not wanting to have an exposure where there's more of a potential for. <br> I guess an investigation with the Department of Labor you know which doesn't mean you're you're initially have an issue or a problem or a real problem it's just there's there's a there's a potential likelihood. <br> That there might be in structuring a transaction so. <br> So the trustee wants to make sure it's there in place and a lot of the deals that we're putting together usually when we look at the the, it's usually around a million dollars of coverage what do you see is that kind of a normal fiduciary insurance coverage. <br> Really depends on the size of the transaction the larger the transaction you do the more coverage that will be required so, I was hoping to think about this and generally we see things from maybe two and a half percent of the transaction size 25-cent the transaction size in terms of the limits, being required so I say probably around about five percent of transactions eyes were sort of seeing in terms of the fiduciary limits being required course yeah as an author of. <br> <br> [9:27] We recently conducted a benchmarking of liability study across all of the diesel companies now in our program here of course, you know there might be some transactional theesopguy in there there might be some larger view stops in there which which are ongoing esops as well so we also have that information we can share if anybody's interested after podcast and reaches out to you Philip and yeah you can share that, yeah if you got anything like specific like that we can always put it on our website. <br> And then in even if you want to put a link to your guys as stuff I'm fine with that too but we're just trying to like. <br> The whole point of this is to be a resource like we people need to know this information so that they can, not be surprised by hey this is going to happen like you're going to have this this is a cost we're going to build into the into the feasibility by the way we're going to build this into the cost of being an ongoing ESOP company so it's just part of the it's part of what you should be planning for. <br> <br> [10:22] I'm saluting so typically the fiduciary Insurance the trustee is covered in that is that is that usually what you're seeing. <br> <br> [10:31] So it depends on this natural person wording on every fiduciary policy and that extends to an independent individual trustee. <br> But, there's it might not necessarily extend to an Institutional trustee such as a bank okay yeah that we may be able to name the individual on the policy within the institutional trustee to have them listed but, the insurers are very reluctant to. <br> To name an entity which is an Institutional trustee by an individual trustee and coverage is granted under that natural person wording got it huh yeah okay so so we need to be cognizant of when you're placing coverage is really. <br> You know asking the insurance company they may not be aware that natural person wording extends to an external trustee so it's worthwhile clarifying during the process. <br> <br> [11:23] For sure in that and that is a decision tree that you'll go through do you do use an Institutional trustee in the very beginning or do you use an individual trustee. <br> And that'll be part of partly up to you but somewhat guide by your advisor as you go through the process. <br> <br> [11:40] So in there in the normal requirement so you've got a fiduciary then. <br> Where do you I mean dno is kind of the next level I guess of insurance in that is going to be for specifically for the board of directors is that kind of corrector. <br> How would you describe the data policy as an additional piece of insurance. <br> <br> [11:59] That's right it deep dno really covers the corporate obligations of the company versus the fiduciary obligation of the trustees and fiduciaries but you know one of those individuals might wear both hats for example, so you'll find that you know that that board member will also have fiduciary responsibilities for the put the ESOP as well so really you need to have both those coverages in place to have tap the full coverage and there are also aspects of the ESOP which could potentially be covered hundred Eno policy as well for example anything prior to the formation of the ESOP, diesel plan actually being formed any representations or errors in the information provided and feasibility softer side of things, so really to have to avoid any gray areas it's best to have both those coverages in place for an ESOP. <br> But more generally speaking for Dino policy its balance sheet protection for us to see a print example a claim comes in from a vendor supplier. <br> <br> [13:01] A regulatory body. <br> And the entity has to indemnify itself and and in pain settlement any judgment that then would reduce the corporate value of the company of the entity which impacts the. <br> I wish impacts the the benefit plan with the ESOP so I think it's kind of heightened to have a dno policy when you are actually an ESOP simply because of that balance sheet protection and the impact on the benefit plan as well so yeah. <br> Yeah so just to kind of clarify that too I think it's really good point the the way it will affect the benefit plan in an ESOP is if your balance sheet. <br> <br> [13:37] Is going to be deemed for potential claims you're going to the valuation itself will suffer and if the valuation suffers. <br> Because it's going to be part of it you're basically going to get the the total Equity value will go down because you're going to be. <br> The company without dno has to support the claim and that's going to come right out of cash so that would reduce the equity value. <br> <br> [13:59] So that's prudent and it's kind of normal right I mean for most most transactions like it's kind of normal to get both the fiduciary and the dno is that what you're seeing. <br> Absolutely and furthermore it's best to have it with the same insurance carrier because you don't want it to be any gray areas or ambiguity over you know, what's more of a core production versus producer reaction and you don't want any squabbling between insurance companies on who picks up what part of the claim, so ideally it's best to have them with the same insurance carrier and and and it's common to have an existing DNL policy coming into the transaction. <br> With another carrier and so the best recommendation is to just go ahead and let that one go away and then replace it with a new policy. <br> With the same carrier that's doing the fiduciary probably cost effective and better. <br> <br> [14:48] And that's what we run into sometimes a company already has a DNR fiduciary policy in place, so do you then put that policy for the company Prides V sub transaction into a runoff into a tail to company exposure, or more of a speed U cost-prohibitive or can you find an insurance carrier willing to pick up that retroactive exposure of the company prior to the sub transaction and then on an ongoing basis it might be more cost-effective, to have a policy which covers fully retroactively and then on the go poured basis making sure you cover the transaction and again you're not having any, arguments over who's covering lead the transaction the old insurer or in your insurer the insurer is basically picking up that exposure. <br> And you kind of want to time this at the correct me if I'm wrong on this time it at the time that the closing is done so the very beginning. <br> The next very next day then you're bound and you have insurance for both dno and fiduciaries that is that the best way to do it or is there a better way to do it. <br> <br> [15:50] The day of the transaction and we usually need to provide proof of the coverage ahead of the transaction being done and then we let the insurance policy of transactions going ahead such usually how the course runs with that yep all right so then there's the EPL insurance so kind of explain explain that part as well. <br> <br> [16:13] So the Employment Practices really covers you know any sort of workplace harassment and discrimination any wrongful retaliation and it really doesn't have. <br> Too much specificity to an ESOP company of an it's applicable to all companies in general to carry this because it's a really a high frequency low severity kind of coverage by that I mean you're going to see lots of planes but those claims are going to be low dollar value claims lots and his son twenty thirty thousand dollar range. <br> If there was some something specific to Aesop's on the EPL policy it would be the retaliation aspect to the wrists are because there's no risk of exclusion on the EPL policy Employment Practices policy. <br> And but there's a car back on that policy if for some reason. <br> Participant believe they were denied benefit and they they then highlighted this problem and there it wouldn't fire there's a retaliation car back within UPL portion for a researcher. <br> <br> [17:14] So if they were fired and they had ESOP shares and they came back and we're suing the company for. <br> <br> [17:25] Whatever they are they're claiming right the EPL would kick in. <br> Okay yeah so it might be something like I don't believe I received the correct dollar value my share for the shares. <br> So it could be something along those lines or say for example it was something to do with the welfare plan, you know I don't believe I was given need the correct coverage that I needed they highlight this to their employer and then for some reason they're fired, they could be a callback for the retaliation or spective of that okay got it so two primarily for just for the employees is there any any other insurance that a company might have that. <br> Would protect them already from that type of issue because it like you said it doesn't necessarily have to be an ESOP for them to come back and. <br> Sue the company yeah yeah just be Employment Practices is you know more generally speaking from are applicable for any any company out there yeah, does it become when you do an ESOP does it increase the premium on that type of insurance because now they have a benefit there or is it. <br> Is it about the same before after. <br> <br> [18:30] What drives on it on the coverages we provide and you something really drives the fiduciary coverage and Eno and premium it doesn't doesn't affect impact EPL coverage to my knowledge anyway because the rating factor for the three different coverages would be, on a dno the corporate assets is the main rating Factor an underwriter would use to derive a premium so they'll be looking at the size of the corporation and the financial performance on Employment Practices it's more the location you're in so California is a highly litigious state, you also have like a Illinois for example lots of biometric violation claims so it really it's the location and the employee town and the cluster business. <br> That really drive the Employment Practices premium there are certain industries which which have high dollar claim values you know particularly for lawyers those are high dollar claims and so and Inland fiduciary funds it really is, corporate so Benefit Plan assets that drive the drive the premium there. <br> <br> [19:31] Okay that's very helpful so sorry California and Illinois and sorry for those Industries like attorney firms that you're this it is what it is but. <br> I think it's helpful though because there's people probably in those states there they go know you know, um I have more taxes and I also have more Insurance you know cost of doing business. <br> So that brings me to like the real kind of. <br> Question I love to talk about our think about is like you know what's happening behind the curtain and your underwriting process psych ear. <br> You get a call for me or an email like a we got a closing and you know and then your you're shooting out your you're things that you need you have an application and you have certain things you're going to need from the trustee and all that so walk us through like you know obviously what you're going to need to get somebody under written you know what they provide and then secondly like what are they actually doing with this information from an underwriting perspective. <br> <br> [20:27] So really I'm from the outset to get an Underwriters attention is vital to have a full submission if you send a partial submission in, especially like form it forming an ESOP or transactionally so if you descend you know a few pieces of financial information you really not going to get the underwriters attention so, like we always say if you want to underwrite attention provide a full submission and that would include a main application which would be like just general information on the company it would be the dno section e PL section of fiduciary section to be completed. <br> <br> [21:03] Tend to get more specific there would be an ESOP supplemental questionnaire which would say the sun was formed attorney used in the transaction valuation firm included they really want to credential who all a professional service providers are in any transaction and they're really looking at that head of the transaction. <br> <br> [21:20] It will ask you no information about the potential size of the transaction The Leverage new needed on the transaction, and then you get into things like the top of the corporate financials and pre transaction and maybe you get some pro forma Transat every right pro forma financials after the transactions being completed. <br> <br> [21:41] They really want to know how the company is performing financially is that going to be an ESOP which has longevity, is it going to be able to support a Share value which doesn't fluctuate too much, so really they're looking they're looking at Industries and stable performing companies if they are going to offer and coverage and then they'd like to see draft term sheets as well, so they can get a graphical any potential sort of name changes in the transaction any idea on the warrants that might happen in a transaction moving forward, I'm so they're really trying to get a grasp at the whole the whole transaction here and the company before the transaction to company post transaction added some shareholders going to be still with the company, you know, are they going to be new people brought in to manage the company after the transaction so they're looking at this Obsession aspect of it as well so there's a multitude of factors that really kind of way and up as they as they look too bright coverage and the information that's provided really really helps them get there quickly and then the next big factor is nda's and on Reliance letters which, kind of I think the bane of the top industries life really it's what those require is that the. <br> <br> [22:58] Underwriters don't rely on the valuation report to. <br> To provide coverage essentially in a document and those need to be squared away well ahead of time prior to the transaction to make sure there's no hiccups with the letters. <br> In getting them getting them go by the underwriters legal team for example so soon you can start the ndaa non Reliance process to better and fill it you might. <br> You might be able to elaborate a little bit more on that side of things yeah I think it's having I think the biggest thing that I would elaborate on is the. <br> <br> [23:32] Like you it said you want you want all the detailed information and so some people that I give that information to. <br> They're really kind of scrambling and they really don't know and what exactly so we end up kind of getting into it with them and say alright let's let's help you kind of fill out all these forms and, so on on some of the other stuff like the nda's in the non Reliance it's just helping kind of walk hand while you know. <br> Walking by the hand through the whole process so that they can get that, the key is this timing you want to make sure that you have enough time to do it all so that you're not stressing everybody out in the process on the on the. <br> You know everything you described on the underwriting makes sense because you're just trying to figure out what the risk profile is you know what you guys are what you're actually ensuring what there is profile is on the valuation one of the things you guys require is that you're going to get, from the trustee the actual valuation that they used. <br> <br> [24:29] To negotiate the turn so we're I don't I think we give you the final term sheet right as part of the doctor package. <br> <br> [24:36] Yeah so usually to get coverage found they just want to see that the fairness and pinion transfer you. <br> And evaluation kind of much of the values that there's no drastic change prior to how they were going to underwrite it and then to what had transpired. <br> Essentially that's what they're trying to do with that and they look at the various different valuation techniques as well and when they look at the valuation report, and what's and what's interesting about that is that the sell-side can't see the valuation because it's part of a prohibitive. <br> <br> [25:08] The department of Labour process agreement that the cell site can't see it ever in that in that negotiation and after the negotiation so the trustee won't share it with. <br> The sell side but it with the ndaa and the. <br> Underwriter they will release that to the underwriter of the insurance company the carrier, unless parties that get to see that the better right here yeah you don't even get to see her right Patrick you're not going to get that don't know yeah that's right the course of least resistance is best with, with that goes directly from the trustee valuation firm to trustee to the underwriter obviously you need to get the interest at the underwriter ahead of, head of sin did not report so once you've kind of Whittle down the the underwriters interested in inviting coverage that's when you really provide the information. <br> <br> [25:57] So on a normal like a timing standpoint and then this is probably my experience I mean I guess would be better for you guys to have more time but you know, I think I usually have like I've seen you guys turned things around in a week you know is that pretty quick or obviously it would be nice to have a little more time how fast can you turn around and policy or binder. <br> If you had anything available pretty quickly okay you know within a couple of days if you have. <br> If you're approaching those Insurance markets that are well-versed in signing these non-violence and nda's it can be really quickly oftentimes you know if you get an insurance carrier that's not well versed in that that can take 2-3 weeks, I can really hold the process up so. <br> I would say that you know Insurance Co is that right use of companies under the you know and fiduciary and regularly CDs mbas and on Reliance letters from from all this the same valuation firms for example so. <br> <br> [27:00] Yes long as this is and ndl normal I've seen previously it can be a quick sign off we can get the underwriters attention on it and turn it around pretty quickly and that's and that's my experience was is, the client has an insurance agent that doesn't understand the stuff and then they're trying to get their carrier to understand it and then. <br> <br> [27:19] And then we're like all that guys let's just go ahead and call Patrick it's like you know sometimes that's just is the way it is or which we do our best I've seen it happen but it's hard sometimes for some, some people to really get its that nuanced honestly. <br> <br> [27:35] Well I would add to that as well that we often work with any sort of companies or to be ESOP companies current insurance broker, so we will act as what is known as a wholesale grow crew as well so, we can be accessed by their local broker or national broker can then bring those the submission and we can negotiate and place coverage on their behalf that's cool as well so yeah kind of gets the both World situation you can kind of keep the relationship. <br> Of the broker you know you don't have to deal with to Insurance Brokers not many people fill it want to deal with two Insurance Brokers or three Insurance Brokers so, we can often work in that capacity as well and help people out now that's actually really good point yeah so the people you know relationships are so important to some companies and like in the we're just now doing this so it's like it may not be I want to replace everything so, I like I like, I think that's really helpful for you guys to be able to do is it add more cost to the whole thing for them or is it less or no notes have additional cost whatsoever it all it does is maybe just slows down the process in terms of getting the information from from one party to another and, if for example you have. <br> <br> [28:43] Professionals involved in the transaction like yourself are you then liaising with that insurance broker or directly with those just it just a day. <br> Other channel villena process a little bit but we can often just include the local insurance broker after the fact, I'm work with them in the future on the renewal for example that's cool let's get information yep so trend-wise what are we seeing really over the last year or two years on premiums because of the. <br> The sap world or whatever what are you guys seeing is it going up yes so take you back to sort of pre covid. <br> Those Halcyon Days and. <br> <br> [29:24] We were seeing five percent increases at that stage 2019 into 2020 we start seeing 10-15 percent increases and when you can compound that out on a 10-thousand dollar premium suddenly postcode with you at fifteen thousand dollars or more would have previously been a ten thousand dollar policy, I'm so compound interest can kind of work against you really in that sense but we really seen premiums that stage now where they are decreasing by 5% or maybe increasing at a maximum of five percent most renewals now flat, in terms of pricing so there's a lot more capacity in the marketplace there's a lot more willingness to buy Aesop's I from what I've seen in the last six months or so so I believe it bodes well for the industry in general. <br> <br> [30:09] I think that says something about the industry to because if that's happening. <br> Then there is that there's probably a stabilized like things are getting done much better with a lot I mean volatility in the ESOP World means to me, deal got done and it got blew up right so there's a dll claim that means insurance is being you know the triggers being pulled and that is going to Ripple so I think that's a very good sign and honestly from my perspective with all the new legislation with. <br> Now the Department of Labor having to come in and give more guidance. <br> I'm thinking I'm expecting that to continue to stabilize maybe even reduce some of the risks in the future but. <br> We'll see nothing ever really goes down but you know you do and I think it's important for Brokers to let insurance carriers know about all these good things that are occurring, need something industry and and regulation of the DOL yeah and guidance from the ol so yeah it's big hopefully that helped me trends in lowering premium more capacity in the marketplace and more willingness for people really to create yourselves as well. <br> <br> [31:11] Exactly now you because you're the broker you're not really involved in this as much but what's your insight into the claims over the last year has it. <br> Has it gone up yeah so I mentioned to you previously that the Employment Practices coverage really we're seeing an increase in claims on now just really cuz it's high frequency but with the fiduciary coverage it really is and low frequency High severity now we do often you know policies do often get tagged with them and investigation but an investigation might not yield any defense costs, Bible yield any settlement or judgment so we do see extent that we're getting notifications on our policies for every investigations from the Department of Labor, but really in the last sort of year to 18 months we really haven't seen any any major claim activity in terms of judgments or settlements on the polyp, now every now and again they can come around every couple of years and you have a real real high severity event Mmm Yeah if something happens and you know. <br> Kind of big wave happens and then it kind of settles down again so. <br> <br> [32:14] So going into like when you know it's kind of a skit was going to ask this earlier but I'll just ask it now so is there something that makes somebody a company more insurable or less insurable, and I'm kind of I know the answer to that is like somebody's more risky and less risky but is there a time where you're like we can't provide coverage for somebody would and what would that entail yes I think that the big ticket is. <br> Trustee so okay if you're doing a transaction without an independent trustee I think there's a lack of people in the market wanted to provide coverage, we actually saw a couple of insurers pull up the market for any internal L steed, I'm going Aesop's and these were resource that had been in existence for 20 years and the people within them had been a trustee for that for the vast majority of it but they suddenly turned their back on, on writing any shop which was internally trusty steed, yeah so but what we see now is that more people are looking to have an external crusty more Underwriters looking for a company to have an external trustee year and especially the transactional stage. <br> Do you guys do you guys in the trustee side do you look at. <br> <br> [33:29] Um profi mean I don't know how to ask this question but is there some trustees that you're more comfortable with and there's some that you're less comfortable with or is it pretty much if you're a trustee we're comfortable with you. <br> <br> [33:40] I think the underwriters one of their best friends probably Google. <br> In that they do Google companies and they specifically look for for litigation involved and various different things and, I think they maybe have it in the back of their mind is well if we extend coverage. <br> Both the likelihood of us being investigated but this company being investigated as part of the trustee being investigated for example so. <br> <br> [34:09] I think they maybe credential service providers, sure yeah and I think part of part of the process to go through developing an ESOP and brand-new from out of the Chute you know you're you're going to interview trustees and that's going to be likely one of the questions you should ask the trustee is like have you been investigated have you had a claim you know have you had any Department of Labor issues tell us more about that, so you know before you get too deep with hiring the actual. <br> Trustee some people put an ESOP deal together and they just kind of I don't know I'm just like the way I do it as I always interview at least three people just to get our three trustees just to get a good. <br> Sense of who's a good fit for us and I think that's the right thing to do from the fiduciary standpoint but I know some deals get put together and. <br> They just they don't actually go through that whole process but you know not to not to say that their trustees are not insurable it's just I think it's helpful to ask those questions, absolutely and another another thing they really look for is did you follow any process agreements that when the transaction has been done as well that's that's a question I guess ask ya, yeah that's and that's a good question then the process agreements for people's you know understanding is that that is what the trustee has to follow or should be following, in terms of the actual transaction in that includes independent valuation firms that includes the way that they. <br> <br> [35:31] Negotiate the adequate consideration for the purchase price I'll there's a lot involved in that. <br> I think you know I don't know if this is true or not but they're parsis Agreements are they going to be replaced with the Department of Labor's new guidance and. <br> Enough kind of talk that up a little bit I don't know for right now we're still we're still kind of under that so I don't know in the future if the Department of Labor comes in with something that's. <br> Going to replace or supplant the process agreement process. <br> <br> [35:59] Process going product anyway so I don't know if you know anything about that but it's just something I'm wondering how it's going to change. <br> I think it will help underwrite these things if that is the case and like you I don't know if they'll superseded anything or not yeah it is stay but I think it definitely helps the industry as a whole and. <br> I'm hopefully it's not too prohibitive whatever whatever guidance they put out there. <br> <br> [36:23] Yeah it'll be interesting because you know I think I'm shaking my head wondering will be better and when it's all done I think if people think it will be, but it's hard for I think the apartment of Labor to make a strong statement you know with anything it's easier for them to sit back and judge what people have done it's much harder for them. <br> To put something out there. <br> Then it's subject to interpretation right just like the Internal Revenue Service Code sections and how do we interpret that and some things are going to be hopefully black and white but we'll see hopefully it does make it all better but. <br> <br> [36:55] So that's great so anything as we kind of close out the the episode today anything that you kind of like. <br> Help people to be prepared for when we're thinking about doing ESOP from an insurance standpoint. <br> <br> [37:09] Um I just really think like you mentioned you know going through credentialing trustees maybe I think. <br> <br> [37:18] The important thing is also to speak to your insurance agent and let them know what's going to be coming down the pipe with this because, they're going to need to make adjustments to their policy if there is going to be an ESOP transaction as well, and so I think notifying all the parties who are going to be part of the transaction or needed in the transaction is important and to get it hooked good head start on that I think that's what I saw. <br> That's absolutely vital. <br> So with all of that I think that's very good information and I love I love the what we cover today because it's just really that's really key to what you're going to be expecting. <br> Um so Patrick's an expert added and and you know if you guys want to get ahold of Patrick. <br> <br> [38:01] What your insurance like you guys have a website or something or yeah we do Murray Insurance Murray Insurance okay showed prompted by insurance, I'm also an ESOP association website as well okay are so itís cool so awesome well great well thank you so much for helping us out today with the information that you gave us and. <br> For everybody else we just want to say thank you for listening and check us out on our website at journey to an ESOP, dot-com if you have more questions just please shoot those over to us so with that have a great day and enjoy your step your next up on this journey to an ESOP. </p>
About Journey to an ESOP & Beyond
ESOPs are gaining traction. In the "Journey to an ESOP & Beyond” podcast, Phillip Hayes explains the process of the ESOP transaction and addresses ESOPs from a business owner’s perspective. The "ESOP Guy" illuminates the simplicity of ESOPs as he debunks common misconceptions that ESOPs are immensely costly and complicated.
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