36th Annual Conference – Legislative Information

If you’re attending the Association’s 36th Annual Conference this week in Washington, DC, and will be meeting with your member of Congress, below are a few highlights on recent pro-ESOP legislation and information concerning a negative ESOP proposal in the President’s 2014 FY Budget.

You can find additional information in the Lobbying Kit which will be available at the Conference and in the 2013 Spring Advocacy Kit which is available on the website.

Senator Kelly Ayotte Renews Work to Protect Employee Ownership: Introduces Pro-ESOP Bill, S. 273

Press release here.

On February 13, 2013, Senator Kelly Ayotte (R-NH) introduced S. 273, a bill to modify the definition of fiduciary under the Employee Retirement Income Security Act of 1974 to exclude appraisers of employee stock ownership plans (ESOPs).


Senator Roy Blunt, R-MO

Senator Amy Klobuchar, D-MN

Senator Mary L. Landrieu, D-LA

Senator Mitch McConnell, R-KY

This bill is a response to the Department of Labor’s (DOL) proposed anti-ESOP regulation mandating all private ESOP company appraisers be ERISA fiduciaries.

While the original proposal was withdrawn, if any regulation was finalized to make appraisers ERISA fiduciaries there would be extreme confusion over whether the appraiser or the trustee[s], and other current fiduciaries, make the decisions about acquisition of shares on behalf of average pay employees. More troubling, it would leave private ESOP companies open to lawsuits by aggressive class action trial lawyers. Leaders at the DOL say a new proposal will be issued in July 2013. It is expected DOL will not alter the proposed regulation’s mandate that all appraisers of ESOP stock be ERISA fiduciaries.

Pro-ESOP Bill Introduced in Senate, S. 742

Press release here.

The ESOP Association expresses strong support for S.742, the Promotion and Expansion of Private Employee Ownership Act of 2013, introduced April 17, 2013 by Senator Ben Cardin (D-MD) and co-sponsored by a bi-partisan group of Senators. Co-sponsors include:

Original Co-Sponsors

Senator Ben Cardin (D-MD)

Senator Roy Blunt (R-MO)

Senator Amy Klobuchar (D-MN)

Senator Mary Landrieu (D-LA)

Senator Pat Roberts (R-KS)

Senator Debbie Stabenow (D-MI)

Senator John Thune (R-SD)

Joined as Co-Sponsors as of April 23

Senator Mike Crapo (R-ID)

Senator Sherrod Brown (D- OH)

S. 742 would amend the Internal Revenue Code of 1986 and the Small Business Act to expand the availability of employee stock ownership plans (ESOPs) in S corporations and expand opportunities for existing S ESOP corporations.

The ESOP Association Disappointed with ESOP Proposal in President Obama’s Budget

Press release here.  Additional information here and here.

Today, The ESOP Association expressed disappointment over a provision in the President’s Fiscal Year 2014 budget that pertains to employee stock ownership plans (ESOPs). Included in the budget document is a provision to eliminate Internal Revenue Code section 404(k). This incentive for ESOP creation and operation permits a C corporation to deduct the value of dividends paid on ESOP stock passed through to employees in cash, deductions used to pay the ESOP acquisition loan, or when the employee reinvests in more company stock in his/her ESOP account balance.

“This is a major proposal to reduce an incentive to create and operate an ESOP; we are disappointed it has been included in the President’s budget,” said ESOP Association President, J. Michael Keeling. “It is counter-intuitive to eliminate an incentive for a policy that resulted in fewer layoffs during the Great Recession. According to the 2010 General Social Survey, employee stock owned companies laid off employees at a rate of 2.6% in 2010, whereas the rate for conventionally-owned companies was 12.1%.  It’s baffling to hear the Administration preach about creating jobs and then take away a proven policy that sustains jobs.”

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