A bill was introduced in the U.S. Senate that would eliminate barriers that businesses and their owners face in establishing S corporations owned by Employee Stock Ownership Plans (S-ESOPs).
The Promotion and Expansion of Private Employee Ownership Act would incentivize owners of S corporations to sell their stock to an ESOP by providing deferral treatment for contributions of S Corporation stock to an ESOP so long as certain reinvestment requirements are met. It would also provide technical assistance for companies that may be interested in forming an S ESOP. Further, the legislation seeks to ensure that small businesses that become ESOPs retain their SBA certification.
“S corporation ESOPs encourage and expand retirement savings by giving American workers the opportunity to keep more of the fruits of their labor,” Sen. Rob Portman (R-OH), one of the bill’s sponsors, said. “In a time where economic security is at the forefront of everyone’s minds, Congress must act to ensure that Americans are rewarded for their hard work and have every tool available to save for life after retirement.”
There are approximately 6,500 employee stock ownership plans serving more than 14 million participants, according to lawmakers.
“Americans deserve the opportunity to build secure retirement savings. S-ESOPs provide small business owners and workers with the opportunity to build retirement savings, and they have proven to be resilient even in tough times,” Sen. Ben Cardin (D-MD), who also sponsored the bill, said. “We need to preserve and expand this structure to enable more businesses to grow and to allow employees to accrue these valuable benefits.”