ESOP Advocacy: Protect & Promote Pro-ESOP Laws in the U.S.

When the Employee Retirement Income Security Act (ERISA) was enacted in 1974, the number of businesses taking advantage of new tax incentives for C corporation ESOPs steadily grew. Beginning January 1, 1998, the numbers increased again as S corporations were also now permitted to sponsor ESOP plans. The tax incentives not only benefit the sponsoring company, but also the selling shareholders and the employees.

Last year the Employee Ownership Foundation released new information from the 2010 General Social Survey showing that employees in the U.S. who had employee stock ownership were four times less likely to be laid off during the Great Recession than employees without employee stock ownership. In a joint project with the Employee Ownership Foundation, the National Center for Employee Ownership found that employee ownership has averted a substantial amount of unemployment, therefore saving the federal government over $23 billion in 2010. Pretty convincing evidence of how ESOPs have helped privately owned businesses and the economy. Still, there are lawmakers who believe that ESOP tax incentives should be changed and/or revoked.

Today, The ESOP Association announced that Senator Kelly Ayotte (R-NH) introduced S. 273, a bill to modify the definition of fiduciary under the Employee Retirement Income Security Act of 1974 to exclude appraisers of employee stock ownership plans (ESOPs). The bill is co-sponsored by Senators Roy Blunt (R-MO), Mary L. Landrieu (D-LA), and Mitch McConnell (R-KY). This bill is a response to the Department of Labor’s (DOL) proposed anti-ESOP regulation mandating all private ESOP company appraisers be ERISA fiduciaries. We need to encourage our Senators to support this bill!

The ESOP community has been fighting against the DOL on this issue since their 2010 proposal to make independent ESOP appraiser fiduciaries of the plan. But as evidenced by Senator Ayotte and his colleagues’ recent bill, we need the help of our elected officials in Congress. We frequently participate in ESOP advocacy work, including visits to our representatives on Capitol Hill and visits from representatives to ESOP company locations nationwide. Contact us if you would like to find our more about participating in this important effort. Let’s ensure that our Congressional representatives know what having an ESOP means to employee-owned companies, their employees, their community and the economy.