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23 W. St. U. L. Rev. 53 (1995-1996)
ESOPs: Corporate Advantages Put Taxpayers at a Disadvantage

handle is hein.journals/wsulr23 and id is 59 raw text is: ESOPs: Corporate Advantages Put
Taxpayers at a Disadvantage
By Stanley R. Pietruska III*
For over twenty years, the Employee Retirement Income Security
Act (hereinafter ERISA)' has been the most important part of employee
benefit law. In 1974, Congress felt a need to help employers shape the
retirement future for workers. To meet this need, it created ERISA to
give employers some clear direction as to where they should begin.
Employees were not the only group to be helped out; employers were
also to receive their fair share of benefits. Huge tax advantages were
to be Congress' incentive for the employers.
It is how these tax advantages are implemented to the detriment of
society that we are concerned with today. The rosy picture painted by
proponents of retirement plans, such as the Employee Stock Ownership
Plan (hereinafter ESOP),2 is often illusory as to the true benefit to
society and workers.
This article will attempt to show the actual effect these plans have
on employers and employees. It will also flesh out the effect on the
American taxpayers who, in essence, finance ESOPs. Tax dollars spent
on ESOPs could be redirected to other programs and lessen the tax
After reading this article, it will be clear that ESOPs' tax benefits
are both unnecessary for their promotion and are an economic boon to
those companies who have implemented them. The end result is a
waste of taxpayer dollars, which hurts us all.
* J.D., Oklahoma City University, Dec. 1993; admitted to New Jersey Bar, June
1994; member, American Bar Association, since 1990; member, American Trial Lawyers
Association, since 1991; currently a sole practitioner in Jersey City, New Jersey.
1. Employee Retirement Income Security Act of 1974, Pub. L. No. 93-406, 88 Stat.
829 (1974) (codified at 29 U.S.C. § 1001 (1974) (hereinafter ERISA)). (Hereinafter, all
citations to ERISA and a section number refer to the code section as found in Pub L. No. 93-
2. See Employee Stock Ownership Plan described in detail infra in Section IB.

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