WASHINGTON, D.C. (May 7, 2015) –Senate Finance Committee members Pat Roberts (R-KS) and Ben Cardin (D-MD) introduced legislation yesterday to enable more employees to be owners of private companies and help boost retirement savings for more workers. The Promotion and Expansion of Private Employee Ownership Act of 2015 (S. 1212) eliminates barriers that privately held businesses and their owners currently face in establishing a new ESOP or expanding the employee-ownership stake in an existing S corporation. The measure was introduced with strong support from a record number of original co-sponsors, including Senate Finance Committee members Mike Crapo (R-ID), John Thune (R-SD) and Debbie Stabenow (D-MI). Other original co-sponsors were Sheldon Whitehouse (D-RI), Al Franken (D-MN), Heidi Heitkamp (D-ND), Pat Leahy (D-VT), Roy Blunt (R-MO), James Risch (R-ID), Kelly Ayotte (R-NH), and Susan Collins (R-ME).
House Ways and Means Committee members Dave Reichert (R-WA) and Ron Kind (D-WI) introduced similar legislation in the House (H.R. 2096) just last week.
“The legislation will encourage employees to save for future needs, including retirement,” Senator Roberts said. “The more we do to help people save, the more resources are freed to make critical investments, particularly in investments that grow jobs and help the economy.”
“Americans deserve the opportunity to build secure retirement savings. S ESOPs have proven resilient even in tough times while providing an effective means of retirement savings for their workers,” said Senator Cardin. “We need to preserve and expand this structure to enable more businesses to grow and to allow their employees to accrue these valuable benefits.”
The introduction of the bill comes on the heels of a study showing just how well S corporation ESOPs have performed for their employee-owners. New data compiled by EY’s Quantitative Economics and Statistics (QUEST) practice shows that S corporation ESOPs outperformed the S&P 500 Total Returns Index by an impressively large margin (62%), net assets increased over 300%, and distributions to participants totaled nearly $30 billion from 2002 to 2012. “S corporation ESOPs are providing an increasingly important role in supporting the retirement security of their participants,” said Robert Carroll, National Director of QUEST and one of the study’s authors. Carroll discussed the findings of the EY study today at a policy roundtable held at the National Press Club in Washington, DC, entitled “Growing the Middle Class: Employee Ownership, Retirement Security, and S ESOPs.”
“The time is ripe for making it easier for privately held businesses and their employees to more effectively save for retirement while providing those employees with greater opportunity to own a ‘piece of the rock’” said Steve Smith, Chair of ESCA. “Making employee ownership plans more accessible would help promote a brand of capitalism that works for all, providing a boost to middle class workers well beyond the prospects of virtually any other policy opportunity before Congress today.”
Congress created the S corporation ESOP structure to encourage and expand retirement savings, giving more workers in private companies the chance to own their companies through an ESOP qualified retirement savings program.
Among the provisions in The Promotion and Expansion of Private Employee Ownership Act are measures that will:
- Enable owners of S corporations to sell their stock to an ESOP;
- Provide needed technical assistance for companies that may be interested in forming an S ESOP;
- Ensure small businesses that become ESOPs retain their SBA certification; and
- Affirm the importance of preserving the S ESOP structure in the Internal Revenue Code.
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The Employee-Owned S Corporations of America (“ESCA”) is the Washington, DC voice for employee-owned S corporations. ESCA’s exclusive mission is to preserve and protect S corporation ESOPs and the benefits they provide to the employees who own them. These companies have an important story to tell policymakers about the tremendous success of the S ESOP structure in generating long-term retirement savings for working Americans and their families. ESCA provides the vehicle and the voice for these efforts. ESCA represents employee-owners in every state in the nation. More at esca.us