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The Employee Ownership Update

Corey Rosen

February 5, 2001

(Corey Rosen)

Bush, Portman/Cardin Propose Retirement Plan Reforms; Private Company ESOPs Not Affected

President Bush weighed in on the company stock in retirement plan issue with a moderate proposal apparently limited to 401(k) plans (legislative details are not available). The main provisions are:

The sponsors of last year's retirement plan provisions in the new tax law, Rob Portman (R-OH) and Benjamin Cardin (D-MD), introduced their own bill (The Employee Retirement Savings Bill of Rights) that would affect both public company ESOPs and 401(k) plans. It would require that:

Both bills would protect existing provisions for ESOPs in closely held companies, where the vast majority of ESOPs are. Private company ESOPs are almost always accompanied by other diversified retirement plans; public company ESOPs are usually part of 401(k) plans. The provisions of the Portman-Cardin bill should not have a major disincentive effect on ESOPs in public companies, and of course, would be very welcome news, as would be the Bush plan, for ESOPs in private companies.

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