President Donald Trump this week received a letter from 27 influential members of the House of Representatives, urging him to rein in overzealous and unfair enforcement of regulations that apply to ESOP companies.
The letter offers powerful support for ESOP companies, at a time when that support is sorely needed.
The Employee Benefits Security Administration (EBSA), a division of the Department of Labor, has a well-documented history of pursuing litigation against ESOP companies, while refusing to issue regulations that would offer those same ESOP companies a clear path to compliance.
The letter addresses this issue in its opening paragraph, stating that "the department's practice of 'regulation through litigation' is harming small businesses and their employees."
The representatives add that the Labor Department has used "counter-productive enforcement tactics, including taking inconsistent legal positions," and that the department's actions could threaten "the system Congress carefully crafted to encourage employee ownership."
In addition to litigation, the letter notes, the department uses high-pressure tactics—such as prolonged investigations and the threat of legal action—against ESOP companies. One investigation went on so long that a company had difficulty securing financing for three years running. In another case, a small business was told to terminate its ESOP or risk being sued by the department.
Although the Labor Department —and EBSA specifically—are tasked with protecting the value of employees' retirement savings, the department's "policies are putting workers' savings at risk as the excessive cost of responding to the department ultimately reduce the value of ESOP companies," the House members wrote.
Michael Keeling, President of The ESOP Association noted that, "the document is an important milestone in the battle to protect ESOP companies from unfair regulatory practices." The 27 representatives who signed the letter have significant influence and include one third of the House Committee that oversees the Department of Labor.
Copies of the letter were sent to the Secretary of Labor, the Assistant Secretary of Labor in charge of EBSA, and the Solicitor of Labor.
To read the letter in full, click here.
The ESOP Association
1200 18th Street NW
Washington, DC 20036-2506