Joco Today

U.S. Senator Roger Marshall, M.D., has spearheaded a bipartisan initiative urging the U.S. Department of Labor (DOL) to finalize regulations concerning the "adequate consideration" exemption for employee stock ownership plans (ESOPs). The letter emphasizes the need for clear regulatory guidelines under the Employee Retirement Income Security Act (ERISA), which was enacted nearly fifty years ago.

ERISA permits ESOPs to purchase employer stock using funds borrowed from the sponsoring company, provided that the ESOP pays no more than "adequate consideration." Despite ERISA's passage in 1974, no definitive regulatory framework has been established by the DOL to guide ESOP companies in meeting this exemption.

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

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

The letter highlights several benefits of employee ownership: "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."

The letter further asserts: "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."

The full text of Senator Marshall’s letter is available online.