News Archive

"[T]he American Ownership and Resilience Act (AORA) [HR 3248; S 1645] would expand pools of investment capital necessary to grow the field while respecting the original intentions of the founders of ESOP legislation to create not ephemeral employee ownership but stable, long term employee ownership which broadens participation in business ownership and strengthens the American economy."  MORE >>

"Private equity firms are seeking a new legal definition of an ESOP, a new structure of tax benefits only they can receive, and broad exemptions from five decades of employee protections embedded in [ERISA].... [S]ober analysis of their public assertions and privately shared plans surfaces tremendous problems for the future of existing, and not yet formed, ESOP companies."  MORE >>

"Pete Stavros, founder of Expanding ESOPs, shared ... a much more detailed public policy proposal with the ultimate aim not to promote ESOPs as we know them today, but to convince Congress to create a new type of qualified retirement plan under [ERISA] and to call them ESOPs. ... TEA agrees with some of the issues Expanding ESOPs highlights in its principles. However, the detailed STEP policy proposal is the wrong solution if the true goal is employee ownership and building retirement wealth for employee owners."  MORE >>

"Prevalent among public and private organizations alike, [annual incentive plans (AIPs)] often are reserved for senior professional and management positions. However, in [one] study, 52% of ESOPs extend AIP eligibility to all employees. This compares to only about one-third of private and public companies ... The prevalence of LTIs among ESOPs are more aligned with that of private companies at approximately 80%, compared to 99% among public companies."  MORE >>

28 pages. "A few of the most common forms of employee ownership are the Employee Stock Ownership Plan (ESOP), Employee Ownership Trust (EOT), Employee Stock Option Plan (ESO), Restricted Stock Units (RSU) and Worker Cooperatives (co-ops).... Employee ownership isn't meant as a replacement for wages or retirement plans. Rather, it is meant to supplement wages and help employees build generational wealth and greater autonomy in the workplace."  MORE >>

"S 2403, the Retire Through Ownership Act ... would ... [a]mend the definition of 'adequate consideration' under ERISA to provide a fiduciary with good faith reliance on the methodologies set forth under [Rev. Rul. 59-60] in determining the fair market value of an asset."  MORE >>

"[T]he Retire through Ownership Act (S 2403), could make it easier for companies to avoid legal challenges to the valuation of shares the ESOP acquires.... [T]he Employee Ownership Representation Act of 2025 (S 1728), would add ESOP representatives to the ERISA Advisory Council.... Both bills will now move to the House."  MORE >>

27 pages. "This paper looks at each of these risks based on the now-extensive research that is available on all of these issues. The data show that: [1] ESOP plan participants fare far better than com- parable employees in comparable companies in terms of retirement security ... [2] The default rate on ESOP leveraged transactions is close to zero.... [3] While ESOP firms do fail, they do so at a far lower rate than non-ESOP companies. [4] While litigation risk is a legitimate concern, only an average of about 17 cases per year make it to court, and the settlements are generally under $15,000 per participant."  MORE >>

"Despite these advantages, ESOP formation has slowed in recent years, largely due to legal uncertainty and post-closing litigation risk, particularly around valuation practices. That may be about to change, as bipartisan efforts in Washington seek to lower barriers and provide greater certainty, paving the way for a more ESOP-friendly environment."  MORE >>

"Procedural Notice 5000-872764 ... states, 'Regardless of the requirements stated throughout this SOP for business valuations, an independent business valuation is not required when the Lender is making a loan involving ESOPs for the types of loans discussed in this Paragraph B. In lieu of an independent business valuation, the Lender may use the valuation obtained by the ESOP that was made in accordance with ERISA specifications.' "  MORE >>

"The Balance the Scales Act (HR 2958) ... would amend ERISA to require that EBSA submit an annual report to Congress on so-called 'common interest agreements' (CIAs) or what the bill referred to as 'adverse interest agreements.' ... [The EBSA Investigations Transparency Act (HR 2869)] would require EBSA to submit an annual report to Congress providing a status update on its investigations in order to help the committee conduct 'effective oversight on investigations' by EBSA.... [T]he Retire Through Ownership Act [HR 5169] would create a safe harbor for ESOP fiduciaries that use IRS rules for appraising shares in ESOPs."  MORE >>

"[J]ob satisfaction is higher for employees in ESOPs than for observationally similar workers in non-ESOP firms and for [work from home (WFH)] workers than for their non-WFH peers.... ESOPs raise satisfaction by increasing worker participation on collective workplace or firm decisions while WFH raise satisfaction by increasing worker flexibility in their individual work activity.... ESOPs had more extensive WFH than non-ESOP firms during the COVID-19 pandemic."  MORE >>

"The new regulatory agenda for the [DOL] indicates that new regulations for ESOP valuations could come as soon as January 2026. The regulations were required by Section 346 of the SECURE 2.0 Act of 2022."  MORE >>

"To address the costs associated with the ESOP wind-down process, buyers should negotiate a dedicated escrow or reserve specifically for ESOP wind-down costs. This should be based on: [1] Estimated distributions and participant counts; [2] Projected legal, fiduciary and administrative costs (e.g., cost to administer participant distribution elections, obtain fiduciary tail policies, and seek an IRS determination letter); and [3] Potential audit and compliance expenses, including any expenses related to operational or other compliance issues for the plan."  MORE >>

"ESOPs tend to create wealth for a broader set of employees than 401(k) plans because they generally do not require employee contributions to the plans ... [T]he average ESOP account balance was found to be more than double the average account balance at a comparable conventional firm ($132,000 vs. $64,000). Further, nearly 80% of S corporation ESOPs also offer a 401(k) plan, either separate from or combined with the ESOP."  MORE >>

"If the ESOP owns 100% of the S corporation, the company effectively pays no federal income tax. If the ESOP owns less than 100%, the tax benefits are prorated ... For business owners, this creates an opportunity to redirect dollars that would otherwise go to taxes into company growth, employee benefits, or strategic investments."  MORE >>

"The purpose of the anti-abuse rules is to permit S corporation ESOP tax benefits ... but eliminate abusive ownership and equity arrangements.... [T]he anti-abuse rule is not a test performed by most qualified plan software programs. ...  Whether you pass the test may depend on the dynamics of the S corporation’s equity structure and non-ESOP compensation arrangements, which may change year to year and during the year."  MORE >>

"The plaintiffs in Anderson alleged that certain fiduciary defendants breached their duty of loyalty to the plan's participants when they made certain investment decisions that ultimately benefited Intel. That claim failed in the first instance because plaintiffs did not tie the fiduciaries' decisions to underlying benefits to Intel, but it also failed because ERISA does not prohibit fiduciaries who have multiple loyalties." [Anderson v. Intel Corp. Inv. Policy Comm., No. 22-16268 (9th Cir. May 22, 2025)]  MORE >>

"[T]he Promotion and Expansion of Private Employee Ownership Act [S 2461] ... would ... [1] [Provide] deferral treatment for contributions of S Corporation stock to an ESOP so long as certain reinvestment requirements are met. [2] Provide technical assistance for companies that may be interested in forming an S-ESOP. [3] Ensure small businesses that become ESOPs retain their SBA certification.... [4] Create the position of an 'Employee Ownership Advocate' at the [DOL] to support the formation and success of employee ownership."  MORE >>

"Recent legislative developments at both the federal and state levels underscore a growing commitment to promoting employee stock ownership plans (ESOPs) ... In May 2025, significant strides were made with the introduction of two federal bills aimed at enhancing ESOP structures, alongside California's proposed SB-713, which seeks to integrate ESOP considerations into state contracting processes."  MORE >>

"Referring to complaints by some in the ESOP community regarding how the [DOL] has conducted its regulatory oversight of ESOPs, [Secretary of Labor Lori Chavez-DeRemer] commented that 'we're here to undo the culture of harassment.... I understand how poor regulation and misguided agency agendas can directly impact business success.. .. It is my mission to support you, not regulate you into oblivion.' "  MORE >>

"[T]he Employee Ownership Representation Act [S 1728], would add two new ESOP company board members to ... the ERISA Advisory Council.... The Employee Ownership Fairness Act [S 1727] codifies and expands existing IRS private letter rulings that allow C corporation ESOPs to apply the Internal Revenue Code Section 404 contribution limit separately for [1] employer contributions to repay ESOP loan principal and [2] employer contributions to other defined contribution plans or a nonleveraged component of an ESOP. "  MORE >>

"Under prior law, licenses to sell cannabis could not be transferred for five years, and then only under certain circumstances. The new law, SB-215, is a set of cannabis reform provisions that includes one allowing an exception to this rule when a cannabis licensee sells to an ESOP."  MORE >>

Rev. Apr. 2025. "What's New: The form and the instructions have been updated to include additional information regarding Employee Stock Ownership Plans (ESOPs)."  MORE >>

"[T]here are several actions the Department can take in the near term that would have an almost immediate positive impact for ESOPs.... [1] Terminating common interest agreements.... [2] Adequate consideration.... [3] Ending the national enforcement project against ESOPs."  MORE >>