119-s1727

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 1727 Introduced in Senate

    (IS) ]

<DOC>

119th CONGRESS
 1st Session
 S. 1727

To amend the Employee Retirement Income Security Act of 1974 to permit 
 employee stock ownership plan participants to benefit from the full 
 amount of beneficial ownership that can be accrued in the plan while 
also fully realizing the benefits of saving for retirement in a defined 
 contribution plan.

_______________________________________________________________________

 IN THE SENATE OF THE UNITED STATES

 May 13, 2025

 Mr. Cassidy introduced the following bill; which was read twice and 
 referred to the Committee on Health, Education, Labor, and Pensions

_______________________________________________________________________

 A BILL

To amend the Employee Retirement Income Security Act of 1974 to permit 
 employee stock ownership plan participants to benefit from the full 
 amount of beneficial ownership that can be accrued in the plan while 
also fully realizing the benefits of saving for retirement in a defined 
 contribution plan.

 Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

 This Act may be cited as the ``Employee Ownership Fairness Act of 
2025''.

SEC. 2. FINDINGS.

 Congress finds as follows:

    (1) While Congress permitted the creation of employee stock 
 ownership plans

    (ESOPs) in the Employee Retirement Income 
 Security Act of 1974, these plans are not just a retirement 
 plan for their participants.

    (2) The legislative history of ESOPs indicate that ESOPs 
 were intended to help the economy at a time when bank financing 
 was difficult for companies to obtain, with the Joint Committee 
 on Taxation categorizing the ESOP provisions of the Tax Reform 
 Act of 1984 as ``Incentives for Investment and Continued 
 Economic Growth''.

    (3) ESOPs empower workers to gain ownership of their 
 enterprise, thereby aligning the incentives for owners and 
 workers and affording workers an economic stake in the 
 company's success.

    (4) ESOPs serve as a mechanism of finance whereby workers 
 who otherwise would not have the means can acquire the 
 businesses where they work.

    (5) ESOP employees who run successful, profitable companies 
 are often unable to make full use of their defined contribution 
 plans as a result of their company's success accruing to their 
 ESOP balance, thereby causing their other plan contributions to 
 exceed the annual cap.

    (6) Unlike defined contribution plans where the amount 
 contributed is determined by the employee, ESOP contributions 
 reflect growth in the company and its value rather than planned 
 contributions by the employee or employer. This is why the vast 
 majority of ESOPs also sponsor a defined contribution plan, 
 such as a qualified cash or deferred arrangement under 

section 401

    (k) of the Internal Revenue Code of 1986, which facilitates 
 the diversification of workers' retirement savings.

    (7) Sections 404 and 415 of the Internal Revenue Code 
 impose limits on benefits and contributions under qualified 
 retirement plans. These limits impede the ability for ESOP 
 employees to diversify their retirement savings and make their 
 own retirement savings contributions and often require their 
 employers to deny matching contributions they would otherwise 
 receive.

SEC. 3. ESOP AMENDMENTS.

    (a) ERISA.--Subtitle B of title III of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1221 et seq.) is amended by 
adding at the end the following:

 ``PART 3--SPECIAL RULES FOR EMPLOYEE STOCK OWNERSHIP PLANS

``

SEC. 3033. SPECIAL RULES FOR EMPLOYEE STOCK OWNERSHIP PLANS.

 ``For purposes of the Internal Revenue Code of 1986, with respect 
to an employee stock ownership plan (as defined in 

section 407
            (d) (6) )--
 ``

    (1) for purposes of applying 

section 404

    (a)

    (3)
        (A) of the 
 Internal Revenue Code of 1986, the contributions taken into 
 account for purposes of clause
            (i) thereof shall not include--
 ``
        (A) contributions of employer stock; or
 ``
        (B) contributions made to repay loans used to 
 acquire employer securities;
 ``

    (2) the limitations of 

section 404 of such Code shall be 
 applied separately to such plan and any other defined 
 contribution plan of the employer;
 ``

    (3) in determining annual additions under 

section 415
            (c) (2) of such Code, employer contributions under 
 subparagraph
        (A) thereof are determined without regard to--
 ``
        (A) contributions of employer stock; or
 ``
        (B) contributions made to repay loans used to 
 acquire employer securities; and
 ``

    (4) for purposes of 

section 415 of such Code, forfeitures 
 allocated to accounts under the plan shall not be taken into 
 account as annual additions (as defined in 

section 415
            (c) (2) of 
 such Code).''.

    (b) IRC.--

    (1) In general.--Subparagraph
        (A) of 

section 404

    (a)

    (3) of 
 the Internal Revenue Code is amended by adding at the end the 
 following new clause:
 ``
            (vi) Exception for esops.--In the case of 
 an employee stock ownership plan (as defined in 
 

section 4975

    (e)

    (7) ), the contributions taken 
 into account for purposes of clause
            (i) shall 
 not include--
 ``
            (I) contributions of employer 
 stock, or
 ``
            (II) contributions made to repay 
 loans used to acquire employer 
 securities.''.

    (2) Separate determination of limitations.--Subsection

    (a) of 

section 404 of the Internal Revenue Code is amended by 
 adding at the end the following new paragraph:
 ``

    (13) Separate determination for esops.--In the case of an 
 employee stock ownership plan (as defined in 

section 4975

    (e)

    (7) ), this section shall be applied separately to such 
 plan and any other defined contribution plan of the 
 employer.''.

    (3) Determination of annual additions.--The second sentence 
 of paragraph

    (2) of 

section 415
            (c) of the Internal Revenue Code 
 is amended--
        (A) by striking ``457

    (e)

    (16) ) without regard'' and 
 inserting ``457

    (e)

    (16) ) and without regard'', and
        (B) by inserting ``, and in the case of an employee 
 stock ownership plan (as defined in 

section 4975

    (e)

    (7) ), employer contributions under subparagraph
        (A) are determined without regard to contributions of 
 employer stock or contributions made to repay loans 
 used to acquire employer securities'' before the period 
 at the end.

    (4) Special rule.--

Section 415 of the Internal Revenue Code 
 of 1986 is amended by adding at the end the following new 
 subsection:
 ``

    (o) Special Rule for ESOPs.--In the case of an employee stock 
ownership plan (as defined in 

section 4975

    (e)

    (7) ), forfeitures 
allocated to accounts under the plan shall not be taken into account as 
annual additions.''.
            (c) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after the date of the enactment of this 
Act.
 <all>