At a Glance
This article summarizes recent federal legislation affecting employee stock ownership plans (ESOPs), including bills passed by the Senate in 2025 and others awaiting further action. Highlights include the Retire Through Ownership Act, which clarifies valuation standards; the Employee Ownership Representation Act, which strengthens ESOP advocacy within the Department of Labor; and several pending measures that expand contribution limits and S corporation participation. The article also includes practical steps ESOP companies can take now to stay informed and engaged while awaiting legislative outcomes.
Contents
- Retire Through Ownership Act
- Employee Ownership Representation Act / Advocate for Employee Ownership Act
- Employee Ownership Fairness Act / Promotion and Expansion of Private Employee Ownership Act
- What ESOPs Can Do Now
- Looking Ahead
New ESOP legislation is introduced each year. Like all legislation, significant time is spent moving it through the legislative system with no guarantee of the outcome. Bipartisan backing is often a major benefit for ESOP legislation, but fiscal scoring, implementation, and floor time slow progress. Advocacy is key. Below is a summary of recent legislative activity at the federal level.
Retire Through Ownership Act
The Senate passed S.2403 by unanimous consent on October 9, 2025. It would define Employee Retirement Income Security Act (ERISA) “adequate consideration” for private-company ESOP stock and allow fiduciaries to rely in good faith on independent appraisers using IRS Rev. Rul. 59-60. This is a much simpler and less ambiguous measure than what has been previously proposed.
A companion measure, H.R. 5169, was unanimously voted by the House Education and Workforce Committee to send to the House for consideration on September 17, 2025.
Benefits: Less valuation ambiguity, fewer fiduciary disputes, and greater legal certainty for ESOP sponsors and trustees
Next Steps: The bill awaits House floor action. If passed in identical form, it will move to the President for signature; otherwise, differences must be reconciled before enactment.
Employee Ownership Representation Act / Advocate for Employee Ownership Act
The Senate passed the Employee Ownership Representation Act (S.1728) on October 9, 2025. The bill adds ESOP representation to the ERISA Advisory Council and establishes an Office and Advocate for Employee Ownership within the Department of Labor.
The Advocate for Employee Ownership Act (S.2474), introduced July 28, 2025, would create a DOL Advocate to promote ESOP awareness. Much of its language was incorporated into S.1728.
Benefits: Would give ESOPs a direct voice inside the Department of Labor, improve policy feedback, and raise national visibility for employee ownership programs. The Office and Advocate for Employee Ownership would sit outside of ERISA.
Next Steps: Moves to the House for committee referral and floor scheduling; considered a likely priority given unanimous Senate support.
Employee Ownership Fairness Act / Promotion and Expansion of Private Employee Ownership Act
The Employee Ownership Fairness Act (S.1727), introduced May 13, 2025, would exclude ESOP contributions from annual defined contribution limits. It was referred to the Senate HELP Committee but not advanced to the Senate.
The Promotion and Expansion of Private Employee Ownership Act (S.2461 / H.R.3105) would expand S-corporation ESOP eligibility and streamline related tax and SBA provisions. Introduced April 30, 2025, in the House and July 24, 2025, in the Senate.
In Practice: These would expand how much companies can contribute to ESOPs and make it easier for S corporations to form or grow them.
Next Steps: Both measures await committee action and could be revived through broader retirement or tax legislation. Each faces budget and scoring challenges that may delay advancement absent inclusion in larger legislative packages or advocacy.
What ESOPs Can Do Now
While the future of these bills is uncertain, ESOP-owned companies and those considering an ESOP can take proactive steps:
- Stay Informed – Monitor developments in Congress and through organizations such as The ESOP Association and the National Center for Employee Ownership.
- Engage Policymakers – Share your company’s ESOP success story with legislators to help illustrate the real-world impact of employee ownership.
- Plan Strategically – Work with your accounting and legal advisors to understand how valuation litigation and current contribution caps affect your ESOP or your potential sale to an ESOP and how potential changes could help or open new opportunities.
- Educate Employees – Keep your employee-owners updated on legislative efforts that may enhance their long-term financial benefits.
Looking Ahead
These ongoing legislative efforts highlight bills that have been active in 2025, illustrating the growing recognition of ESOPs as a powerful tool for business continuity, employee wealth building, and economic resilience. Growing awareness and advocacy of ESOP ownership ensures that real changes to ease this form of ownership transition will occur given time and effort.
Ben Lord is a Principal at ARB specializing in audit and consulting services for employee benefit plans. Ben manages employee benefit plan audits in an efficient, cost-effective way by customizing services to meet a plan’s specific needs. He also specializes in consulting and financial accounting services for construction, real estate development, manufacturing, and professional services firms.
