Employee Ownership Blog
Scott Rodrick

Scott Rodrick

DOL Employee Ownership Head Laid Off

Update: As of March 7, the recently terminated head of the Division of Employee Ownership is to be reinstated March 10.

The National Association of Plan Advisors (NAPA) reports that Hilary Abell, who in July 2024 was appointed as the head of the Division of Employee Ownership at the Employee Benefits Security Administration (EBSA) within the U.S. Department of Labor (DOL), has been terminated as part of a wave of actions across the U.S. government.

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Scott Rodrick

OMB Completes Review of DOL ESOP Valuation Regulation

Valuation is a crucial topic for ESOPs because in closely held companies, the price paid for company stock in transactions must be based on an independent outside appraisal, and likewise ESOP-held stock must be appraised at least annually. Much ESOP litigation over the years has revolved around valuation.

The Department of Labor issued proposed ESOP valuation regulations in 1988 but never finalized them. ESOP professionals have urged the DOL to issue formal guidance instead of leaving it to the courts, and the SECURE 2.0 Act of 2022 (as part of the WORK Act) directed the DOL to develop formal guidance on valuation. In October 2024, the DOL sent a new proposed ESOP valuation regulation to the Office of Management and Budget (OMB) for inter-agency review of costs and benefits. The OMB has now completed its review of the regulation.

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Scott Rodrick

IRS Further Clarifies Current Focus on ESOPs

We reported on August 9 that an IRS press release issued that day stated that as part of “an expanded focus on ensuring high-income taxpayers pay what they owe,” it was warning “businesses and tax professionals to be alert to a range of compliance issues that can be associated with" ESOPs. On September 19, we reported that in discussions with Employee-Owned S Corporations of America (ESCA), the IRS clarified that the press release was not an official notice and that the focus was only on a small subgroup of practitioners and a specific ESOP structure used for tax avoidance.

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Scott Rodrick

Ex-House Members Propose ESOPs as Solution to Retirement Crisis

Ron Kind (D-Wis.) and Erik Paulsen (R-Minn.), both former U.S. representatives who served on the House Ways and Means Committee, authored an editorial in The Hill, Employee ownership could be the key to solving our retirement security crisis, pointing out that "At a time when retirement seems out of reach for many Americans, there is clear and convincing evidence that people who work for private businesses with Employee Stock Ownership Plans . . . have far greater retirement security than the average American." Citing recent research from Ernst & Young on S corporation ESOP participants and NCEO research on ESOPs and retirement security, Kind and Paulsen note how ESOPs help workers; at the same time, they cite a report from Matrix Global Advisors and an NCEO analysis of ESOP litigation to criticize regulatory uncertainty around ESOPs that makes it more difficult to establish an ESOP. They express hope that the project at the U.S. Department of Labor (DOL) to establish clearer guidance for ESOPs will "finally put to bed the regulatory uncertainty that has cast a shadow over employee ownership for decades," stating that the ESOP community is ready to work with the DOL and the administration "to usher in a new era of employee ownership."

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Scott Rodrick

It May Rain Cats and Dogs in Seattle, But Our Puppies Will Stay Dry

We've seen our conference grow from a small pack of attendees in the early 80s to more than 2,000 due to our dogged insistence on serving the employee ownership community's needs, but everyone was always human, even if they did howl sometimes. Now we're going to have puppies too! Barking up the wrong tree when you communicate your plan? Have a bone to pick with repurchase? You'll have no obligation to feel bad after cheerfully cuddling with our captivatingly cute canine companions.

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