Yesterday, the House Committee on Education and Workforce
advanced H.R. 5169,
the Retire Through Ownership Act. This bipartisan legislation,
introduced by Congressman Rick W. Allen (GA-12), would provide legal and regulatory clarity in the formation of new Employee Stock Ownership Plans (ESOPs).
During the full committee markup, Congressman Allen delivered the following remarks, as prepared for delivery, prior to the bill's passage:
"H.R. 5169, the Retire Through Ownership Act, provides valuation guidelines to Employee Stock Ownership Plans, or ESOPs. An ESOP is a retirement plan designed to invest primarily in employer stock. ESOPs build wealth for employees to retire and also give employees an ownership stake in their employer.
"For more than 50 years, ever since the enactment of ERISA, ESOP fiduciaries have been waiting for guidance on how to value the employer stock that their plans purchase. The Department of Labor (DOL) has never published definitive guidance. Instead, DOL began a national enforcement project targeting ESOPs. Rather than tell the ESOP community how to value the stock, DOL used legal actions and settlements to guide ESOP stock purchases in a practice stakeholders call 'regulation by litigation.'
"The Retire Through Ownership Act uses Internal Revenue Service (IRS) guidelines, which are tried-and-true guidelines issued under Revenue Ruling 59-60, including companion rulings issued by the IRS from time to time. The bill also provides that an ESOP fiduciary may rely in good faith on a valuation provided by an independent evaluator or appraiser that is based on IRS guidelines.
"The Retire Through Ownership Act will bring an end to the uncertainty that ESOPs have experienced for over 50 years. By doing so, the bill encourages the establishment and maintenance of more ESOPs.
"In July, a companion to H.R. 5169 was unanimously approved by the Senate Committee on Health, Education, Labor, and Pensions. The amendment in the nature of a substitute that I am offering includes changes to make H.R. 5169 more closely match the language requested by Senate Democrats, which were incorporated in the Senate companion bill. I included these changes in the ANS in a bipartisan spirit, and I look forward to bipartisan support for the bill today.
"The ANS makes three changes to H.R. 5169. It clarifies that the Secretary of Labor may issue regulations on this legislation. It clarifies that the bill does not expand the Secretary of Labor’s authority. And finally, it clarifies that no changes are being made to ERISA section 404, which contains fiduciary obligations of prudence and loyalty.
"Finally, thanks go to the ESOP Association for working tirelessly to advance a solution on stock valuation. I urge my colleagues to vote yes on the ANS and to support the Retire Through Ownership Act."
