Senate Unanimously Passes Two Bills to Encourage ESOPs

Members of Congress may not agree on a lot these days, but as they have for 51 years, they do unanimously agree on employee ownership. On October 10, the Senate unanimously passed two bills to promote ESOPs. The first, the Retire through Ownership Act (S. 2403), could make it easier for companies to avoid legal challenges to the valuation of shares the ESOP acquires. A parallel bill (H.R. 5169) has been introduced in the House but has not yet been acted on. The second, the Employee Ownership Representation Act of 2025 (S. 1728), would add ESOP representatives to the ERISA Advisory Council. A parallel bill has not yet been introduced in the House. Both bills will now move to the House.

The Retire through Ownership Act was introduced by Senators Roger Marshall (R-KS) and Tim Kaine (D-VA) to address the risks of ESOP valuation by creating a “safe harbor” for ESOP trustees. It would do this by allowing ESOP trustees to rely on independent appraisals by qualified ESOP appraisal firms using guidance under IRS Revenue Ruling 59-60. First issued in 1959 for valuing small business stock for gift and estate tax purposes, it outlines the basic valuation principles that ESOP valuations typically use, such as weighting earnings, assets, and comparable company approaches; using discounted or capitalized earnings to project enterprise value; and calculating discount rates based on the weighted average cost of capital. ERISA was not enacted until 1974, so Revenue Ruling 59-60 did not apply specifically to ESOPs. In late 2024, the DOL issued its own proposed valuation guidelines, which would have been much stricter, but the new administration recalled them. The bill would allow the Secretary of Labor to issue regulatory guidance in interpreting the valuation provisions in the bill. In July 2025, the Senate Health, Education, Labor and Pensions (HELP) committee voted to advance the bill to full Senate consideration.

The Employee Ownership Representation Act of 2025, introduced by HELP committee chair Senator Bill Cassidy, M.D. (R-LA) and Maggie Hassan (D-NH), would add two new ESOP company board members to the Advisory Council on Employee Welfare and Pension Benefit Plans, also known as the ERISA Advisory Council. The HELP committee adopted two amendments to the bill. One amendment (PDF) incorporates the Advocate for Employee Ownership Act (S. 2474), sponsored by Senators Maggie Hassan (D-NH) and Steve Daines (R-MT), which would establish an Advocate for Employee Ownership with the Employee Ownership Initiative at the DOL. The initiative was mandated by the WORK Act, part of the SECURE 2.0 Act of 2022. The Advocate would help identify opportunities and issues for ESOPs within the federal government to promote employee ownership. A second amendment (PDF), introduced by Senator Bernie Sanders, directs the Secretary of Labor to create an Office of Employee Ownership in the Department of Labor, to be located outside of the Employee Benefits Security Administration (EBSA). The DOL currently has a Division of Employee Ownership located within EBSA as part of the Employee Ownership Initiative. This bill would relocate this function outside EBSA and add a bipartisan seven-person advisory council composed of four employee-owners, one leader from an employee-owned company, one person from an employee ownership organization, and one ESOP service provider.