New Legislation Supports Broader Use of Employee Ownership Models

Senate HELP Committee Chair Bill Cassidy (R-La.) introduced two bills that could incentivize organizations to restructure retirement benefits and employee ownership—developments worth close attention from CHROs and the broader executive team.

The Employee Ownership Fairness Act would amend tax law to allow companies with Employee Stock Ownership Plans (ESOPs) to contribute to employees’ 401(k) accounts without hitting IRS contribution limits.

• This removes a structural barrier that currently forces tradeoffs between ESOP participation and 401(k) matching, allowing for a more integrated retirement strategy and improved benefit competitiveness.

The Employee Ownership Representation Act would add two ESOP-focused seats to the Department of Labor’s ERISA Advisory Council’s 15 members.

• This enhances ESOP representation in federal retirement policy, potentially leading to more supportive regulations and guidance for companies that choose this model.

Regulatory Clarity: In addition, the DOL, constrained by recent laws like SECURE 2.0 and multiple proposed rules under the Biden administration, is moving toward clearer guidance on ESOP valuations to address long-standing legal concerns over employer liability. The nomination of ESOP advocate Daniel Aronowitz to lead the Employee Benefits Security Administration highlights this focus and signals continued momentum.

Why it Matters: Studies on the value of ESOPs show that they lead to greater employee wealth creation and have positive impacts on the workplace such as a stronger ownership culture, improved employee engagement and long-term retention. These reforms would provide benefit flexibility, giving HR leaders greater leeway to blend equity participation and traditional retirement benefits without forcing difficult tradeoffs.

What’s next: While such measures have struggled to advance in past Congresses, they could surface as part of a broader package if paired with Restricted Stock Unit (RSU) legislation that HRPA has proposed.

Bottom line: If enacted, Sen. Cassidy’s bills could make ESOPs a more viable tool for talent strategy. CHROs should evaluate how expanded ESOP support could fit into long-term workforce and compensation planning.