Hearings to examine empowering workers by expanding employee ownership.

Committee on Education

2025-07-24

Source: Congress.gov

Summary

This meeting of the Senate Committee on Health, Education, Labor, and Pensions focused on strengthening America's retirement system, specifically through the expansion and support of Employee Stock Ownership Plans (ESOPs)[ 00:20:39-00:21:27 ] . Speakers emphasized the bipartisan commitment to ensuring workers can retire with dignity and security, with ESOPs presented as a key model for achieving this goal[ 00:22:04 ] .

Themes

Advantages and Impact of Employee Ownership

Employee Stock Ownership Plans (ESOPs) are highlighted as a pro-worker, pro-family, and pro-business model that significantly enhances employee satisfaction, reduces turnover, and fosters greater financial success for companies and their workers[ 00:22:04 ] . Participants noted that ESOPs lead to increased employee pride and motivation, where workers are deeply involved in decision-making and have a direct ownership stake, which boosts productivity and sales. Real-world examples like Torch Technologies, Acadian Companies, and King Arthur Baking Company illustrate these benefits, showing how employees retire with dignity and companies exhibit resilience during economic challenges. Research indicates that ESOP participants often have double the retirement wealth compared to non-ESOP counterparts, experience greater job stability, and work in safer environments.

Regulatory and Legislative Hurdles

A significant barrier to ESOP expansion is the lack of clear federal regulations and guidance, particularly from the Employees Benefit Security Administration (EPSA), which has failed for over 50 years to develop rules making it easier for ESOPs to sell stock to employees[ 00:23:00 ]

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. This regulatory ambiguity, especially regarding company valuations, creates uncertainty and deters many businesses from adopting the ESOP model. Additionally, the ERISA Advisory Council lacks ESOP representation, leaving worker-owners without a voice in shaping policies that affect them[ 00:23:33 ]

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. To address these issues, senators have proposed legislation, including the Employee Ownership Fairness Act, the Employee Ownership Representation Act, and bills aimed at clarifying federal law to protect ESOPs from frivolous lawsuits and providing incentives for S-corporations to transition to ESOPs[ 00:24:23 ]

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. The need for improved financing options, such as loan and loan guarantee programs, was also emphasized to help businesses complete ESOP buyouts[ 00:56:14 ]

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The Need for Increased Awareness and Support

There is a general consensus that a lack of awareness among both business owners and workers about the potential and benefits of ESOPs is a major impediment to their growth. Many retiring business owners, who would prefer to sell to their employees, face difficulties due to the complexity and perceived risks of ESOP transactions. Experts suggest that promoting ESOPs through education, consulting, and government initiatives could unlock a vast potential for employee ownership, with an estimated 137,000 businesses and 33 million employees potentially "ESOPable". Federal government agencies that interact with businesses are also urged to do a better job of disseminating information on ESOPs to encourage their adoption[ 01:08:18 ]

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Tone of the Meeting

The tone of the meeting was overwhelmingly positive, bipartisan, and collaborative[ 00:20:49 ] . Speakers from both sides of the aisle expressed strong support and enthusiasm for Employee Stock Ownership Plans, citing their numerous benefits for workers, companies, and communities. There was a shared commitment to addressing the challenges facing ESOPs and a collective desire to advance legislation that would clarify regulations, improve financing, and increase awareness[ 00:58:20 ]

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. The personal testimonies further underscored the human dignity and financial security that ESOPs provide, fostering a sense of shared purpose among the committee members.

Participants

Transcript

Thank you.
The Senate Committee on Health, Education, Labor, and Pensions will please come to order.  Strengthening America's retirement system is a bipartisan priority on the committee, and we all agree, Republicans, Democrats, every worker deserves the ability to retire with dignity and security.   Congress has made great progress improving Americans' retirement through Secure 2.0, but there's more.  A recent study showed that 86% of Americans think that Congress needs to focus more upon retirement.  And one way to enhance our retirement system is, I like to say, give the worker the power, making sure that they have financial security after finishing his or her career, a place we can start expanding opportunity for employee ownership   is through supporting employee stock ownership plans, or ESOPs, retirement plans in which a company's employees collectively hold stock in the company.  Today, about 11 million Americans participate in an ESOP, including about 39,000 people in Louisiana, and I have somebody representing an ESOP here on the panel.  Louisiana workers who retired from ESOPs received a total sum of over $575 million in payouts   in 2023.  An ESOP model is pro-worker, pro-family, and pro-business.  And studies show that ESOPs result in higher employee satisfaction, lower turnover, and greater financial success that puts more money directly into a worker's pocket.   By the way, I'm proud of this.  Louisiana Senators Russell Long and John Breaux, our representatives at that time, John Breaux, led the effort to create ESOPs when Congress passed ERISA in 1974.  And I understand one of our witnesses, Dr. Blase, is actually Blase, is actually the guy that was hustling when he was 22 years old to get co-sponsors on both sides of the hill.  So we've got that history here today.   Today, we'll hear from Acadian Companies from Lafayette, Louisiana, giving firsthand testimony on how ESOPs empower Louisiana workers, creating economic growth.
And while ESOPs are proven to help workers succeed, outdated federal law makes it difficult for companies to implement the model without being in legal jeopardy.   In ERISA, Congress required the Employees Benefit Security Administration, or EPSA, to develop clear regulations making it easier for ESOPs to sell stock to their employees.  Now, this sounds like a joke.   This sounds like a joke, but 51 years later, EPSA has failed to put in place any rules on this issue, despite repeated bipartisan requests from the committee, and 51 years later, they still haven't done it.  Additionally, the ERISA Advisory Council, which advises the Department of Labor on regulating employee benefit plans, does not have ESOP representation.  Workers who are also owners   should have a seat at the table in shaping policies that affect the combination of a worker and an owner.  As chair of the Help Committee, I am committed to enacting a pro-worker, pro-family agenda   that helps Americans succeed in their career and afterwards.  That's why this committee is leading multiple efforts to strengthen ESOPs so workers can have a stake in their company, building wealth for themselves and their families.  Senators Marshall and Kaine, they're leading legislation to clarify federal law, ensuring that ESOPs can sell shares of their company without fears of frivolous lawsuits.   I introduced two pieces of pro-worker legislation to better support ESOPs.  The Employee Ownership Fairness Act authorizes ESOPs to provide generous and diversified benefits by permitting ESOPs to contribute into 401 plans without exceeding contribution limits.  As a result, employees will save more money for retirement and can invest more in their employer's stock.   The Employee Ownership Representation Act would add two new ESOP board members to the ERISA Advisory Council, giving ESOP owners and workers representation to advocate for policies to improve their lives.
I look forward to discussing these bills.  Thank you all for being here to highlight the power of ESOPs in creating a better life for workers and their families.  With that, I recognize Senator Sanders.
Thank you, Mr. Chairman, and thank you for holding this important hearing.   One of the beautiful things about representing the state of Vermont is that we have some of the best employee-owned companies in the country, and I'm very proud of that fact.  Over the years, I've met with employee-owned companies in Vermont, and never in my life have I seen employees who take more pride   in the work that they do, from senior executives and managers all the way down to the cashier and the store clerk.  In a few moments, I'm delighted that we will be hearing from one of those companies, the King Arthur Baking Company, headquartered in Norwich, Vermont.   King Arthur is not only an enormously successful baking company, what makes this company so special is that it is directly owned by its employees, not some multi-billionaire on Wall Street.  Brock Barton, the chief financial officer of that company, is one of our witnesses.  And Brock, thanks so much for being here today.  Mr. Chairman, at a time when the gap between the very rich and everyone else in our country is growing wider, when millions of Americans are falling further and further behind,   When corporate America has outsourced millions of decent paying jobs overseas, and when the economy continues to struggle to create jobs that pay a livable wage with good benefits, we need to expand economic models that broadly benefit the middle class, not just the 1%.  And I strongly believe that employee ownership   is one of those models which has enormous economic potential and the potential to improve the lives of millions of workers.  Mr. Chairman, when employees own their own companies, when they work for themselves, when they're involved in the decision-making process rather than just being a cog in a machine, they are no longer just punching a time clock.   Unlike large corporations that have been shipping jobs overseas, employee-owned businesses are not shutting down, and they're not moving their businesses to China, Mexico, Bangladesh, or other low-wage countries.
Workers who have a direct ownership stake in the companies they work for become more motivated.

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