Top Advocacy Issues | The ESOP Association

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The ESOP Association

Top Advocacy Issues

Passage of S. 4236

Introduced by Sen. Ron Johnson (R-WI) and co-sponsored by Sen. Tammy Baldwin (D-WI), this bipartisan bill offers grants to companies seeking to expand existing ESOPS or establish new ones.

The bill will help businesses acquire the capital to make infrastructure and technology investments, many of which will be needed in response to COVID-19. New mandates for workplace health and safety will require new equipment for offices and manufacturers. Greater use of online technologies to enable employees to engage with one another and with customers will require new hardware and software. Some businesses are considering internal options to replace a supply chain that has been severely disrupted by COVID. These types of investment create long-term jobs in the U.S. but are difficult to make without federal assistance.

At a time when many businesses are hard pressed to obtain the capital for these kinds of investments, S. 4236 would authorize:

•             A grant of up to $20,000 per employee who participates in an ESOP.

•             Up to $50,000 for costs incurred in developing an ESOP agreement.

•             The Treasury Secretary to transfer unobligated CARES Act funding to carry out the grant program.

This program would launch within 30 days of being enacted and would last until Sept. 30, 2022.

The ESOP Association encourages all members to ask their elected officials to support this legislation. For more information on this bill, see our Frequently Asked Questions. > 

Passage of S.177/H.R. 2258: The Promotion and Expansion of Private Employee Ownership Act

These nearly identical pieces of legislation have been introduced in both the U.S. House and Senate as a package promoting new ESOPs and making it easier to operate existing ESOPs. Both bills provide enhanced opportunities for ESOP financing, provide technical assistance for S Corporations interested in forming an ESOP, and allow small businesses adopting an ESOP to retain their SBA preference status when competing for government contracts. Both bills enjoy balanced, bi-partisan support. There are currently more than 35 Senate co-sponsors and more than 50 House co-sponsors. For the latest information on which members of Congress support these bills, visit our ESOP Champions page.  

In 2020, The ESOP Association is making a push for these bills to be considered and passed before the end of the Congress.  Learn more by downloading the fact sheet here. >

Department of Labor Regulatory Guidance and Clarity for ESOPs

Employee Stock Ownership Plans have two federal regulators – the Internal Revenue Service (IRS) and the U.S. Department of Labor (DOL). Among other things, the DOL serves as the regulatory watchdog looking out for the interests of the Employee Owners in relation to the decisions made on their behalf by their ESOP Trustee(s). This authority is vested under the Employee Retirement Income Security Act of 1974 (ERISA). However, over 45 years has gone by since ERISA became law, yet the DOL has not finished and issued the body of regulations and guidance that companies should follow in order to ensure they are following the law. While DOL began – and nearly finished – the regulatory rulemaking process in the late 1980’s, they never issued the final proposed regulations from 1988.

Since then, ESOP companies have done their best to manage themselves properly under the law, but the lack of regulatory clarity and absence of guidance often makes business decisions difficult and dangerous to navigate.  
For example, ESOPs must perform an annual professional valuation and inform their employee owners of the determined value of the company were it to be offered for sale in the market. These valuations are complex, and while there are standard rules and practices for valuing companies – such as when the sale of a publicly held company must be approved by the Securities and Exchange Commission (SEC) – there is no clear guidance or rule on valuations for ESOPs before or after they are formed.

The ESOP Association is seeking regulatory clarity from the U.S. Department of Labor on a range of essential topics. This guidance clarity is needed so ESOPs do not continue to make business decisions under a fog of regulatory uncertainty. This means ESOPs become more transparent and understandable, while the financial and distractive risk  imposed by regulators  is reduced, if not eliminated. Learn more about ESOPs and the DOL here. >