Two ESOP Bills Advance Unanimously Through Senate HELP Committee
The Senate Health, Education, Labor, and Pensions (HELP) committee unanimously voted to advance two pieces of proposed pro-ESOP legislation, making them eligible for full Senate consideration. It also incorporated the text of a third bill on ESOPs, while deferring action on two others.
The first bill, the Employee Ownership Representation Act of 2025 (S. 1728), introduced by committee chair Senator Bill Cassidy, M.D. (R-LA), 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 also 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 within the Employee Ownership Initiative at the Department of Labor (DOL). 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 DOL, to be located outside of the Employee Benefit Security Administration (EBSA). The DOL currently has an Employee Ownership Initiative located within EBSA. This bill would relocate this function 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.
The second bill, the Retire Through Ownership Act (S. 2403), introduced by Representative Bill Marshall (R-KS), aims to address the risks of ESOP valuation by creating a "safe harbor" for ESOP trustees. It would allow 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 this ruling 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. ESOP advocates have long complained that the lack of clear and practical valuation rules has hampered the growth of ESOPs. The committee adopted an amendment from Senator Sanders clarifying that while the Secretary of Labor could not expand the regulatory authority of the DOL to define the term "adequate consideration" beyond the authority the DOL had before the bill's enactment, the Secretary can issue regulatory guidance in the interpretation of the valuation provisions in the bill.
A third pro-ESOP bill, the Employee Ownership Fairness Act of 2025 (also introduced by Senator Cassidy last week), was removed from committee consideration. The bill would exclude ESOP contributions from the limits currently applied to define contribution benefit plans. It is unclear whether the bill will be reconsidered at a later date.
Meanwhile, Senator Sanders reintroduced the Employee Ownership Financing Act (S. 2458), which would create an Employee Ownership Finance Program within the DOL that would add a $500 billion loan program within the DOL to provide financing for employee ownership transitions. The committee did not accept this proposal as an amendment to S. 1728, but that does not preclude considering it later in this Congress.