The Senate on Oct. 10 passed two bills that would support the advancement of employee stock ownership plans (ESOPs).
The first piece of legislation, the Retire through Ownership Act, introduced by Sens. Roger Marshall (R-KS) and Tim Kaine (D-VA), would allow an ESOP plan fiduciary to work with an independent business appraiser from a qualified ESOP valuations firm and who follows regulatory guidelines under IRS Revenue Ruling 59-60. If these practices are followed, it would provide safe harbor protections for employers offering ESOPs.
A House companion bill to the Retire Through Ownership Act was also unanimously passed by the Education & Workforce Committee in September.
“The Senate’s unanimous passage of the Retire Through Ownership Act is a landmark moment for ESOPs,” said James Bonham, president and CEO of The ESOP Association, an organization dedicated to promoting the plan types. “The Senate has spoken with one clear voice on legislation that will help eliminate regulatory uncertainty and ensure that ESOPs and trustees who follow clear rules will not be subject to needless litigation and harassment by the government and plaintiffs’ bar.”
The second bill, the Employee Ownership Representation Act, introduced by Sens. Bill Cassidy (R-LA) and Maggie Hassan (D-NH), would add two ESOP-focused board members to the Advisory Council on Employee Welfare and Pension Benefit Plans, or the ERISA Advisory Council, to support employee ownership plans during meetings. Currently, the group is comprised of 15 members who advise the DOL on issues surrounding the Employee Retirement Income Security Act of 1974 (ERISA). With the addition of two new members, the council would grow to 17 members.
The legislation would also incorporate a seven-member Advisory Council on Employee Ownership, with each member appointed by the Secretary of Labor. The council will comprise of four employee representatives, one ESOP employer representative, one ESOP service provider rep, and one ESOP organization rep.
The bill also requires the Secretary of Labor to establish an Advocate for Employee Ownership within the Employee Ownership Initiative at the Department of Labor (DOL). This advocate would help promote employee ownership and ESOPs within the federal government.
“The Employee Ownership Representation Act will give ESOPs a much-needed seat at the table and a strong voice to advocate on behalf of ESOPs at the Department of Labor,” added Bonham.
The two bills had previously received overwhelming support from the Senate Committee on Health, Education, Labor and Pensions (HELP), who in July passed the multi-bill package.
Both bills will now move forward to the House of Representatives.