WASHINGTON – In a meeting of the U.S. House Committee on Ways and Means on Wednesday, a bipartisan chorus of members highlighted the decades-long track record of employee-owned S corporations (S ESOPs) in helping Americans build exceptional economic security and retirement savings, and urged the inclusion of provisions to promote and strengthen the S ESOP model as part of a broader legislative package aimed at improving Americans’ retirement security.
Their remarks include:
Rep. Ron Kind (D-Wis.):
“I would also like to thank you [Chairman Richie Neal (D-Mass.)] and ranking member [Rep. Kevin] Brady [(R-Texas)] for your support for legislation that I’ve introduced with Congressman Jason Smith [(R-Mo.)], ‘The Promotion and Expansion of Private Employee Ownership Act,’ which will incentivize S Corporations to convert to employee-stock ownership plans, or ESOPs. Although we didn’t—we weren’t able to include the full legislation in the package before us today, we are able to include language that highlights the benefits that employee owners of S Corp ESOPs enjoy and the positive impact that the ESOP model has had on saving for retirement.”
Rep. Jason Smith (R-Mo.):
“Our ESOP legislation builds on the success of ESOPs in giving employees a stake in the businesses where they work by allowing S Corporations to more easily convert to an employee-owned model. We encourage entrepreneurs planning for retirement to sell their businesses to employees rather than to a competitor. This, in turn, gives employees greater economic security and helps them build their own nest egg. I’m eager to see this ESOP measure pass into law and am committed to doing everything I can to make sure Missouri workers and Main Street businesses will benefit from it. I thank Chairman [Rep. Richie] Neal [(D-Mass.)] and Ranking Member Brady for their support of this policy.”
Further demonstrating the broad, bipartisan support for employee ownership, Senator Ben Cardin (D-Md.) and Senator Rob Portman (R-Ohio), along with 25 original Senate co-sponsors, recently introduced the “Promotion and Expansion of Private Employee Ownership Act of 2021” in the U.S. Senate. The Senate legislation would help extend the substantial benefits of employee ownership to more Americans.
At a time when many Americans are struggling with job losses, research reveals that job growth among employee-owned S corporations has historically outpaced that of the private sector as a whole, and employee-owners are more confident about their jobs and less anxious about their financial futures. In fact, employees at S ESOP companies have more than twice the average total retirement savings of Americans who work at non-ESOP companies.
A recently released study by economist Jared Bernstein, who is now a member of President Biden’s White House Council of Economic Advisers, affirms the benefits of ESOPs and, given that there are still relatively few U.S. ESOPs, urges lawmakers to explore ways to encourage the formation of more employee-owned businesses.
In a previous study, Bernstein demonstrated that employee ownership helps to close the wage and wealth gap between managers and workers in ESOP-owned companies. “Employee ownership — and ESOPs in particular — should be part of our national discussion on ways to reduce inequality,” Bernstein said in releasing the 2016 analysis.
Since Congress created the S corporation ESOP structure through bipartisan legislation over 20 years ago, more than 3,000 private U.S. companies have become S corporation ESOPs, enabling one million workers to have an ownership stake in the businesses where they work.