Senator Marshall Leads Letter Promoting Employee Stock Ownership Plans

Washington, D.C. – Today, U.S. Senator Roger Marshall, M.D., led a bipartisan letter calling on the U.S. Department of Labor (DOL) to complete a final regulation governing the “adequate consideration” exemption for employee stock ownership plans (ESOP).

The Employee Retirement Income Security Act (ERISA) allows ESOPs to buy employer stock using funds borrowed from the ESOP’s sponsoring company itself so long as the ESOP pays no more than “adequate consideration.” When Congress passed ERISA in 1974, it directed the DOL to issue regulations outlining how ESOP companies could satisfy the “adequate consideration” exemption. Despite ERISA being signed into law nearly fifty years ago, no clear regulatory framework exists. 

“Employee ownership is a powerful wealth-building tool proven to boost wealth, morale, productivity, retention, and retirement security while discouraging foreign ownership,” said Senator Marshall. “It is well-past time for the Department of Labor to finalize a regulation that promotes ESOPs nationwide.”

This letter was co-led by Senator Tim Kaine (D-VA) and was signed by Senators Marco Rubio (R-FL), Mazie Hirono (D-HI), Jeanne Shaheen (D-NH), Chris Van Hollen (D-MD), Ron Wyden (D-OR), and Brian Schatz (D-HI).

Highlights from the letter include: 

“Employee ownership, and specifically ESOPs, is a proven way to benefit businesses, workers, and local economies. Studies confirm that employee-owned firms experience stronger overall business performance and resilience during economic downturns. Employee owners at these firms see greater wealth-building opportunities and increased job security and satisfaction compared to their counterparts at conventional businesses. Employee ownership can also be a powerful wealth-building opportunity for traditionally disadvantaged workers.”

“Given the success that ESOPs have seen without clear guidance, one can only imagine how successful they would be if there was a regulatory framework in place that could be used to satisfy the adequate consideration exemption. For these reasons, we respectfully believe the Department should prioritize the approach outlined above to complete a final regulation that encourages ESOP formation.”

You may click HERE to read Senator Marshall’s full letter.