U.S. Secretary of Labor Lori Chavez-DeRemer Meets with ESOP Association CEO Jim Bonham to Discuss Regulatory, Policy Priorities for ESOPs

Less than three weeks after being sworn into office, U.S. Secretary of Labor Lori Chavez-DeRemer met with The ESOP Association’s President and CEO, James Bonham, to discuss the Association’s regulatory priorities under the Trump Administration. Chavez-DeRemer had been a strong and vocal supporter of ESOPs while serving in Congress. Consequently, The ESOP Association mounted a significant advocacy campaign in support of her confirmation as the ESOP community’s top regulator.

“Lori Chavez-DeRemer is going to be a terrific Secretary of Labor, and especially for employee owners and ESOPs,” said Bonham. “She understands our issues, has the right mindset toward the cultural issues endemic in EBSA, and that the environment of regulation by litigation that exists throughout the retirement security infrastructure at DOL is stifling ESOP formation and chocking off those already in existence. My impression is that this administration intends to take bold action to reverse this trend.”

During the meeting, Bonham discussed the current regulatory environment for ESOPs and the need for a cultural shift at the Employee Benefits Security Administration (EBSA), which has had a longstanding bias against ESOPs, their founders, and their trustees. Among several problematic EBSA practices, Bonham highlighted the DOL’s practice of sharing confidential information with plaintiffs attorneys through so-called common interest agreements as a prime example of abuse, as well as the now two-decade long National Enforcement Project unfairly targeting ESOPs for special scrutiny. Bonham also touched upon EBSA lawyers’ use of appraisers who would fail to meet their own standards for ESOP appraisers, pointing to the botched EBSA appraisal the government attempted to use in their recently failed trial of the Bowers & Kubota case.

“ERISA litigation reform is long overdue, not just for ESOPs but for all qualified retirement plans,” Bonham said. “EBSA has forgotten that retirement plans are voluntary for the employer – nobody is required to offer a retirement plan. EBSA’s over-reaching approach to litigation and investigations have contributed immensely to the retirement crisis facing most American households and drives employers to offer only the most bare-bones, simple retirement plans possible. EBSA has made it too risky and costly for companies to try to take care of their employees in their retirement, and now millions of Americans will struggle in their old age as a result.”

Bonham also raised the issue of adequate consideration with the Secretary and her team, and why it is vital for current and future ESOPs to have a fair and transparent regulation that defines a clear process for Trustees and fiduciaries to fulfill their good faith responsibilities. He provided Secretary Chavez-DeRemer with The ESOP Association’s model regulation for adequate consideration, which was developed in concert with some of the foremost experts in the ESOP field. 

“On behalf of The ESOP Association’s membership, we thank Secretary Chavez-DeRemer for a highly productive first meeting that we hope ushers in a new era of mutual respect and cooperation between ESOPs and our chief regulator,” said Bonham. “Secretary Chavez-DeRemer wants to find solutions to help ESOPs succeed and prosper, and we look forward to collaborating on permanent solutions that will last far into the future.”

Bonham extended an invitation for Secretary Chavez-DeRemer to address The ESOP Association’s National Conference in May, and offered to facilitate visits with ESOP companies during her official travels.

For more information on near-term actions the Department of Labor can take to help ESOPs, please see Jim Bonham’s column on page 9 of the ESOP Report.