A measure to spur employee-ownership of private companies is getting bipartisan support in the Senate.
Ranking members in the Senate Finance Committee introduced Tuesday a bill that would allow more S corporation business owners to transfer ownership to their employees and help more private companies access the resources they need to become employee owned. The law eliminates barriers that businesses and their owners currently face in establishing a new S corporation ESOP or expanding the employee-ownership stake in an S corporation.
Sens. Ben Cardin, D-Md., Pat Roberts, R-Kan., and Olympia Snowe, R-Maine, introduced the bill, the Promotion and Expansion of Private Employee Ownership Act of 2011 (S. 1512).
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"S ESOPs have proven resilient even in tough times — hiring new workers as other firms were shrinking — while also providing an effective means of retirement savings for their workers," said Sen.Ben Cardin. "We need to preserve and expand this structure to enable more businesses to grow and to allow their employees to accrue these valuable benefits. Americans deserve the opportunity to build secure retirement savings; far too many hard-working individuals are left with serious questions about their future economic security."
Lawmakers hope to gain more support for this legislation because, according to a press statement issued by Employee-Owned S Corporations of America, S corporation ESOP structure accomplishes "exactly what Congress intended it to do by creating retirement security for millions of American workers in all 50 states."
The group notes a study from University of Pennsylvania shows that S ESOP employees have retirement account balances three to five times higher than the average 401 (k) or other defined contribution plans and that S ESOPs generate $14 billion in new savings each year for their workers beyond what they otherwise would have earned, offering greater job stability and job satisfaction.
They also point out a Georgetown University report, which has found S ESOPs have been better able to weather economic downturns, preserve jobs and, in the case of the recent recession, have grown wages in comparison to their non-S corporation ESOP counterparts.
Added Sen. Roberts, "This legislation supports a simple but powerful premise: when employees own the company, they operate with a vested interest in its success, and that in turn generates tremendous returns for the company, the community, and the economy. Furthermore, with fewer than half of Americans claiming any form of employer-sponsored retirement savings plan, private, employee-owned firms play an important role in ensuring retirement security for workers across America."
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