The ESOP Association Blog

Covering ESOPs and employee ownership

Government Affairs Update, March 2014

ESOP Association President, J. Michael Keeling, provides Association members with an update on the Administration’s FY 2015 Budget and the impact on the ESOP community.


Filed under: Government Affairs, ,

What, “We” Worry?

This article originally ran in the December 2013 issue of the ESOP Report, the newsletter of The ESOP Association. Archived issues are available on The ESOP Association’s website.

We’re a week + into 2014 but this column is a nice reminder for members of the ESOP community.

Many will recall that in the last quarter of the 20th Century, Alfred E. Neuman, the face of the then famous Mad Magazine, captured the public’s fancy with his slogan, “What, Me Worry?” complete with a silly expression. The ESOP community needs to avoid the “What, Me Worry” view of possible rewrites of the Federal income tax laws that impact ESOP creation and operation because cable news TV keep telling audiences that Congress will not pass a tax reform bill.

The ESOP Association will continue to take a different view, and yes, ESOP advocates should worry about tax laws impacting your ESOP accounts and your ESOP clients until…

Later, this column will give the signal when it’s safe to stop worrying.

Here is an analysis that goes beyond the superficial media reports.

Tax reform is important to the ESOP community without regard to whether the House of Representatives considers tax reform legislation in 2014; without regard to whether the Senate considers tax reform legislation in 2014; without regard to whether tax reform legislation lands on President Obama’s desk in 2014.

Why say it’s important even after saying legislation is not going to be considered by the full Congress and thus never become law in 2014?

Simple — tax law history. Regarding major tax legislation, what the House Ways and Means Committee agrees to, becomes the foundation for what actually makes it to a President, the same year, the next year, or even the next two to four years.

Let’s get specific. In 2014, if the House Ways and Means Committee reports to the full House a tax reform bill that repeals the current favorable tax treatment of S ESOPs, or the cap gains deferral for sale to an ESOP of stock of a privately held C corporation, or the tax deduction for dividends paid on ESOP stock by a C corporation, or the possibility that both principal and interest are tax deductible for payments on a loan to acquire employer stock for the ESOP, or contributions to an ESOP are capped along with all other ERISA dc plans at a level below current law, or any other schemes to raise tax revenue by limiting the benefits of an employer sponsored retirement savings plan, then any of the above in a tax reform bill recommended by the Ways and Means Committee has better than a 50% chance of being law someday. [This sentence was long for a reason --- to explain that some provisions of a tax reform bill could impact your ESOP and not be labeled an “ESOP” provision.]

So, during this special time of year, one might welcome the New Year with the false serenity that their ESOPs are A-OK in terms of the year 2014, and back off on the goal of educating, or re-educating, their members of Congress that ESOPs are good for the employees, good for the company, good for the community, and good for the United States.

It is time to toast the New Year, and to rededicate to the principle that persistent repetition is the best policy with regard to making sure our modest national policy promoting employee ownership through the ESOP model is continued.

And to answer the “until” question above, the following words, “Until the Chair of the House Ways and Means Committee says firmly, with no ifs and buts, ‘The Committee will not recommend a tax reform bill in 2014.’” And he just might say no to a tax reform bill at some point in 2014, but why take a nap thinking he will.

Filed under: Government Affairs, , , ,

Tax Reform Update, December 2013

In a final 2013 tax reform, ESOP Association President, J. Michael Keeling, provides Association members with an update on the process and what the ESOP community needs to do in response to coming changes. He also touches briefly on the recent budget resolution and an ESOP case before the Supreme Court. Read The ESOP Association’s statement about the case here.

Filed under: Government Affairs, , , , ,

Stay Focused

This article originally ran as the Washington Report column in the October 2013 issue of the ESOP Report, the newsletter of The ESOP Association. The ESOP Report newsletter is available to Association members on the website.

With the conclusion of Employee Ownership Month, we thought it was an important message to stay focused on your ESOP.

There is no question that the mess in D.C. with the Congress and the President not able to keep basic government functions operational causes most people to throw their hands up and say, “Don’t bother me about possible legislative action involving ESOP laws; Congress cannot even keep the government’s doors open. Fie on all.”

This reaction dominates citizen views, be they left, right, middle of the road, or all of the above.

This column has often said that the effective advocate has to understand the Big Picture to win a specific campaign for ESOPs. But, as Ralph Waldo Emerson said, a foolish consistency is the hobgoblin of small minds.

So, ESOP advocates will be taking a very risky posture to tune down outreach to their members of Congress on the grounds that Congress will do nothing to alter current tax laws to the detriment of employee owners.

Number one, the Congressional tax committees are not Congress. What they do in developing new tax laws is not 100%, or even 50%, determined by the Congressional and White House gridlock.

Number two, what the tax committees do is 90% of the final tax law changes that will be included in a reformed tax code when action by Congress is finally taken.

In other words, the tax committees may finalize their versions of a new tax bill in 2014, and Congress may not send a new tax reform proposal to the President until 2015/2016 or even beyond. But that 2015/2016 proposal will be very likely be nearly the same as what the tax committees agreed to in 2013/2014.

Number three, what is the negative outcome of ESOP advocates continuing to make the case that the Federal tax code should continue a modest national policy to continue the best jobs policy in the U.S. because ESOP companies in the vast majority of instances are more productive, more profitable providing locally-controlled, sustainable jobs with excellent retirement savings benefits? There is none.

Some ESOP advocates also explain their sitting on the sidelines because her or his member of Congress is not on the Congressional tax committees — the House Ways and Means Committee and the Senate Finance Committee. Constituent to member advocacy is the most effective advocacy work possible; the second most effective advocacy work is Congressional member to Congressional member. In other words, a Republican member of Congress not on Ways and Means advocating for ESOPs because her or his constituent has asked him or her to do so with a Republican on the tax committee, especially if from the same state or region, is very effective. In other words, a pro-ESOP statement from a Texas Republican not on Ways and Means to a Texas Republican on Ways and Means or a New England Democrat not on Ways and Means to a New England Democrat on Ways and Means is priceless.

In sum, do not let disgust with partisan shenanigans in D.C. back you off advocating for ESOPs with your Congress people.

Be safe; not sorry.

Filed under: Employee Ownership Message, Employee Ownership Month (EOM), Government Affairs, , , , , ,

Stringing Pieces Together for the Future of ESOPs

This article originally ran as the President’s Page column in the October 2013 issue of the ESOP Report, the newsletter of The ESOP Association. The ESOP Report newsletter is available to Association members on the website.

While Employee Ownership Month (EOM), the Annual Awards for Communications Excellence (AACE), and a national policy sanctioned by the Federal government, might seem disconnected, as a package all are important to each and every employee owner in the United States.

A note about each:

2013 EOM Poster ComSonics - ESOP Poster 2013 72 dpiEOM (see page one for more info; the 2013 poster contest winner is at left) was born in the late 80s as an idea promoted by former Executive Director of the National Center for Employee Ownership, Corey Rosen. When it was presented to the then primary governing body of the Association, the seven person Executive Committee of the Association’s 40 person Board of Directors, the reaction was not enthusiastic. Two or three men on the Executive Committee — in those days all leaders of the Association were men — were of the same mind that it would be an intrusion on the individual plans of each Association member who was doing their “own” thing. As one leader said, “Every month at my company is Employee Ownership Month!” On the other hand, two or three of the men were of the mind that Mr. Rosen had an excellent idea.

With the passage of a few years, and the view that EOM would be a good thing, the Association went all in to promote employee ownership among its corporate members and the idea of “celebrating” the unique, and positive, impact broad based ownership has on an ESOP company and its employees.

Go to our blog and/or YouTube Channel to see what is happening today — special events, visits by decision makers, both local government and national, and meaningful education about how an ESOP company can make each employee more satisfied, with more financial security, than any other organizational structure of a for profit enterprise. And, if you are not into learning from blogs and YouTube, just take time to peruse the Association’s priceless Press and Event Planning Kit for EOM. It contains a “how to” with examples of all the steps and activities an ESOP company can take to enhance ownership among employees, become more noticed and respected in their community, and impact those who consider laws that affect their companies and their employees’ retirement security.

esopaacedarkerBut the one Association program, and this has been stated over and over, that has motivated more to put emphasis on making an ESOP company be all it can be, which only happens when employee owners commit to the fact that, when individual effort is maximized, the “team” wins. This Association program is the AACE program. While thrilling to win a “national” AACE Award recognition, with a modest financial “prize” such as complimentary registration to the Association’s Annual Conference, it’s not the only point of the AACE program. The mere process of cataloging what a company is doing to enhance the impact of wide spread ownership among all full-time employees is a “winner.” Employee owners in a company working on an AACE entry begin to appreciate what their company is doing to make the company special, learning how the more subjective power of ownership is being perceived by fellow employees, and utilizing that learning process more effectively that results in a higher performing company. Each year the process becomes more professional; in turn the Association has to conform AACE rules to new methods of communications, internal and external, that make the process even more professional.

And never ever overlook that part and parcel of the AACE process is the generation of creativity, for example, the posters for the poster contest. Creativity builds team spirit and appreciation. Photos of all poster entries going back to 2007 can be viewed on the Association’s website. Login using the Members Login button at the top of the homepage. Go to About the Association. On the left side menu, under Leadership, click Advisory Committees. The posters are located on the Ownership Culture Committee page.

Our nation has a very modest national policy to encourage employee ownership through the ESOP model. Never kid yourself; there are people who love being cynics and who are by nature, naysayers. Some of these folks occupy positions that influence leaders of the Executive Branch of the government, as evidenced by the Administration’s position that a company with over $5 million in gross revenue a year should not have an ESOP. Some of these folks occupy top positions in the decision making process of the Congress where tax and labor laws are made. I know as I have listened to many a member of Congress talk about lower tax rates, and eliminating special rules for certain behavior, which would include ESOPs, as the best thing Congress can do for American business.

But what EOM and AACE do is prove the pudding is an excellent pudding the vast majority of time. The ESOP pudding proves its worth in a vivid manner when showcasing its ingredients with EOM activities, and posters that become visible in communities across America.

Together, EOM and AACE are key elements in saving ESOPs from the cynics.

Filed under: AACE - Annual Awards for Communications Excellence, Employee Ownership Message, Employee Ownership Month (EOM), Government Affairs, Member Services, TEA Members, , , , ,

ESOP Association President to Participate in Senate Small Business Committee Tax Roundtable

JMK Small Business Comm RoundtableToday, ESOP Association President J. Michael Keeling, will participate in the Senate Small Business Committee Tax Roundtable which will review key provisions of current tax law that impact small businesses. In particular, Mr. Keeling will be responding to the Committee’s specific inquiry as to what current tax laws that encourage the creation and operation of employee ownership through the ESOP model should be retained.

Mr. Keeling will emphasize that the modest incentives for ESOP creation and operation have resulted in employee owned companies that, as research has consistently shown, are more productive, more profitable, and provide locally-controlled, sustainable jobs in the United States. In particular, he will bring to the Committee members’ attention the General Social Survey of 2010 which evidenced that employee stock owned companies laid off employees during the Great Recession at a rate of 2.6% whereas conventionally-owned companies laid off employees are a rate of 12.1%. He will note that the evidence shows that encouraging employee ownership is a successful jobs policy, and Congress should enhance these modest policies to boost employee ownership, which can also address the growing income gap between the working men and woman and the super-rich.

He will conclude his formal remarks with the comment that the growing income inequality is creating an us versus them atmosphere in the United States, which is not good for a democratic society with a republican form of government.

To read Mr. Keeling full statement, please visit The ESOP Association’s website. You can also read it here: Statement to Senate Small Business Committee Tax Roundtable.

Filed under: Economic Performance, Employee Ownership Message, Government Affairs, , ,

Message to Help Save ESOP Tax Law

The Senate has officially begun a process to identify what to include or eliminate in tax reform. Following is information that can be used as a sample letter, email, and/or the basis for a phone call. If you are sending an email, please be sure that someone in the Senate office is expecting the email.

If you would like additional information about the tax reform process, please visit The ESOP Association’s Blog here.

If you would like to download the following, please use the following link to download the Word file – Save ESOP Tax Law Letter.


Suggested Letter/Email/Phone Message to Help Save ESOP Tax Law

Dear Senator ________:

[Name of Company] is owned (by X%) by its employees through an employee stock ownership plan, or an ESOP.

We have learned that Senators Baucus and Hatch have requested that you communicate to them what special tax law provisions you would include in our nation’s tax laws if you were drafting a new tax code for the Federal government if starting from scratch.

[Name of company] and its x employees have benefited from its ESOPs.  [Here you may wish to set forth brief statement[s] how your ESOP has benefited your company and your employees.].

And we are not alone, as there are pages and pages, charts after charts, that prove ESOP companies are good for the U.S. economy, are fair by making middle class employees capitalists, and provide excellent retirement benefits.  Among these 35 plus years of research and surveys of ESOP companies and their employees, the General Social Survey of 2010 evidenced that during the Great Recession employee stock owned companies laid off employees at a rate of 2.6% whereas conventionally owned companies laid off employees at a rate of 12.1%. In sum, promoting ESOP creation and operation is the best jobs policy in the U.S. as the evidence is that the vast majority of ESOP companies are more productive, more profitable, providing locally controlled jobs that through ownership provide better retirement savings benefits than non-ESOP companies.

We at [name of company] thus respectfully request that you communicate to Senators Baucus and Hatch that you believe our national tax policy should continue to encourage employees stock ownership through ESOPs.

Your consideration is appreciated.

Sign by [Senior Executive], or [Employees]

Email:  Only if you have a contact in your Senator’s office, in other words, someone you have talked to before in a personal visit, or via telephone, or have emailed before and there was a response, the same message can be used in an email to the person with whom you had previous contact.

Telephone call:  There are two kinds of telephone calls, and in each you will be talking to, or leaving a message for a staff person.

Type Call 1:  This call is your initial communication to the Senator’s office.  As the person answering the phone, ask if you may speak to the person who is responsible for issues arising from the Federal income tax laws.

If you speak to that person, repeat the message in the suggested letter.

In all probability, you will be placed in that person’s voice mail.  Leave a message similar to the suggested letter, and your name and request a return phone call.

If after a week or so there is no return call, call again, and politely repeat the message, and politely ask if the Senator has decided what to convey to Senator Baucus and Hatch.

Type Call 2:  This call is made two weeks or so after sending in your letter or email.  In this call, you politely ask, if you have received no response to your letter or Email, if it was received.  If not, ask if you can Email a copy, or Email again, or fax it.  If yes, ask if the Senator has decided to convey any position to Senators Baucus and Hatch with regard to ESOP laws.

[If asked about the research evidence you refer to in your letter, email, or phone call, refer the Senate staff person to]


Filed under: Employee Ownership Message, Government Affairs, , , ,

ESOP Company President Testifies to Importance of Employee Ownership

ESOP company leader Barbara Schindler, President and COO, tells House Committee on Small Business that the employee ownership through an ESOP is Golden Artist Colors, Inc.’s New Berlin, New York, key to its recent success, because “When employees are treated like owners they tend to act like owners.” (click to read entire testimony) “Ms. Schindler’s testimony fly’s in the face of the Administration’s position that ESOPs are too risky for employees in companies with more than 10 or so employees because the employees can’t impact the performance of the company where they work,” said Michael Keeling, ESOP Association President.

Filed under: Economic Performance, Government Affairs, TEA Members, , , , ,

Senator Kelly Ayotte Speaks to New England ESOP Association Members

ESOP Association News

The following release was sent out by The ESOP Association today. We’re sharing here with readers.

For Immediate Release: June 17, 2013

Senator Kelly Ayotte Speaks to New England ESOP Association Members

June 17, 2013 (Washington, DC) – Speaking to a gathering of ESOP Association members, Senator Kelly Ayotte (R-NH) once more renewed her promise to protect ESOPs (employee stock ownership plans) and employee ownership in America. The Senator was also presented with the 2013 ESOP Advocate of the Year Award by The ESOP Association’s New England Chapter members. The Award was presented at the Chapter’s Super Regional Board of Directors/Trustee Conference held in Nashua, NH on June 14, 2013.

In February 2013, Senator Ayotte introduced pro-ESOP bill, S. 273, a bill to modify the definition of fiduciary under the Employee Retirement Income Security Act (ERISA) of 1974 to exclude appraisers of ESOPs. This bill is a response to the Department of Labor’s proposed anti-ESOP regulation mandating all private ESOP company appraisers be ERISA fiduciaries.

“The ESOP Association is proud to recognize Senator Kelly Ayotte as the New England Chapter’s 2013 ESOP Advocate of the Year. Senator Ayotte is a strong advocate for the ESOP cause, and the Association, along with New England Chapter members, is grateful for the commitment Senator Ayotte has shown in supporting employee-owned companies,” said ESOP Association President, J. Michael Keeling.

A video of the Senator’s remarks is below. Thanks to ESOP Association member, Chuck Coyne, ASA, Managing Director, Empire Valuation Consultants, LLC, in Hartford, CT for sharing the video link.

Filed under: DOL Proposed Fiduciary Regulation, Employee Ownership Message, Government Affairs, TEA Members, , , , ,

FASB Approves Indefinite Deferral for ESOPs

The Financial Services Accounting Board (FASB) voted to indefinitely defer the Accounting Standards Update (ASU) 2011-04 which would require companies to disclose the significant assumptions and methodologies used in the valuation of company securities that are not publicly traded. The Update had been written in such a way that privately-held companies were likely to be required to provide a footnote in their ESOP audit reports filed with the 5500 form that would have provide information to outside parties that many ESOP companies considered detrimental to the interests of their businesses.

In February 2013, The ESOP Association joined the Employee-Owned S Corporations of America (ESCA) and the National Center for Employee Ownership (NCEO) in sending a letter to FASB regarding the proposed Update. The link to the letter can be found here.


Filed under: Government Affairs, , , ,

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