HR Policy Association endorsed S. 1727, the Employee Ownership Fairness Act, introduced by Senator Bill Cassidy (R-LA).
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The bill would amend ERISA to omit Employee Stock Ownership Plan (ESOP) contributions from the total annual defined contribution plan limits.
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The 2025 limits are set at $23,500 for individual employees and $31,000 for employees over 50.
Currently, contributions to both ESOPs and 401(k)s count toward the same annual contribution limit, forcing employers and employees to choose between the two. S. 1727 would modernize this structure by allowing full participation in both plans—without contributions to ESOPs counting against 401(k) limits.
What they're saying: Recently, Labor Secretary Lori Chavez-DeRemer emphasized the administration’s renewed commitment to supporting ESOPs, highlighting their potential to transform workers’ financial futures.
“I understand how poor regulation and misguided agency agendas can directly impact business success,” she said. “It’s my mission to support you, not regulate you into oblivion.”
Secretary Chavez-DeRemer’s remarks come amid longstanding tensions between ESOP advocates and DOL’s Employee Benefits Security Administration (EBSA), which oversees ESOPs alongside other retirement plans. Critics argue that, while EBSA’s intent is to protect employees, its overly cautious regulatory posture has made it difficult for companies to establish ESOPs and has created legal uncertainty for investment advisors responsible for company valuations.
Earlier this month, President Trump’s nominee to lead EBSA, Daniel Aronowitz, echoed these concerns during his confirmation hearing, pledging to “end the war on ESOPs.” He criticized the agency for “nitpicking the professional judgment” of valuation experts—an essential step in structuring ESOP transactions.
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Of note, the Biden administration had also made efforts to repair relations with the ESOP community, including the creation of an Employee Ownership Initiative within EBSA. Former Assistant Secretary Lisa Gomez acknowledged the concerns, stating, “I totally understand the concerns from the community that EBSA has historically been overly aggressive and discouraged people from pursuing ESOPs.”
Why it matters: Momentum is building for policy changes to encourage broader employee ownership which could open opportunities for CHROs and benefits leaders to include ESOPs in their total rewards strategies.
