U.S. Senators Gary Peters (D-MI) and Jim Risch (R-ID) today announced that they have introduced bipartisan legislation to increase awareness of Employee Stock Ownership Plans (ESOPs) as an employee ownership model for businesses. ESOPs are workplace benefit plans that allow employees to save for retirement while sharing in a business’ profits by ensuring a majority of a business’ holdings are owned by employees.
“Employee Stock Ownership Plans have been a proven success for businesses of all types, from manufacturing to agriculture,” said Senator Peters. “Research indicates that businesses with the Employee Stock Ownership Plan model are more productive, grow faster and have less employee turnover. I’m pleased to join Senator Risch in introducing this bipartisan legislation, which will utilize the business expertise of the dedicated volunteers at the SCORE Association to ensure small businesses have the information and assistance needed to make the transition to an Employee Stock Ownership Plan.”
“SCORE has a nationwide reach that helps thousands of small businesses each year,” said Senator Risch, Chairman of the Senate Committee on Small Business and Entrepreneurship. “I’m glad to introduce this legislation that would utilize SCORE’s existing network of volunteers to educate entrepreneurs on the benefits of employee stock ownership plans, which I strongly support.”
“SCORE is pleased to support Senator Peters and Chairman Risch’s bill to educate small business owners on the value of ESOPs as a potential exit strategy for entrepreneurs who are ready to take the next step in the life of their business,” said SCORE CEO Ken Yancey. “Our volunteer mentors look forward to contributing their firsthand knowledge, gained through decades of business experience, to raise awareness of different exit strategies and models of employee ownership.”
“ESOPs are the perfect transition solution for many successful closely held companies, benefiting both employees and owners. But despite their many tax, planning, and legacy benefits, few owners know that this is even a possibility. The outreach program proposed in this bill would be a very cost effective way to address this issue. It's very encouraging that Senators Peters and Risch are taking the lead in promoting the ESOP model for businesses and employees,” said Corey Rose, Founder, National Center for Employee Ownership.
Under an ESOP model, employees see a direct gain from a company’s long-term success by allowing employees to share in the gains when a business is profitable. Additionally, ESOPs are commonly formed when an owner of a privately owned company departs the business, often for retirement. With owners of small businesses across the nation reaching retirement age, forming an ESOP can be an attractive option for those that want to keep a business’ legacy in the hands of its loyal employees.
Currently, across the United States, over 13.5 million employees participate in 7,000 ESOPs, and employees participating in ESOPs receive 5-12% more in wages and see retirement accounts that are 2.5 times larger than those of their peers.
Despite the success of the ESOP model, the National Center for Employee Ownership found that many business owners are not familiar with ESOPs and lack the resources to transition into an ESOP model. The Small Business Employee Ownership Promotion Enhancement Act will task the SCORE Association - a nonprofit outreach organization supported by the U.S. Small Business Administration (SBA) and comprised of volunteer business owners to deliver free small business services - with a new role in administering informational resources regarding ESOPs. It additionally establishes a position within SCORE to lead efforts to distribute information and general technical assistance that promotes or facilitates employee ownership business forms.