Two new bills have been introduced in the Senate to strengthen employee stock ownership plans and encourage employees to invest more in their company’s stock.

Senator Bill Cassidy, R-Louisiana, chair of the Senate Health, Education, Labor and Pensions Committee, introduced the Employee Ownership Fairness Act and Employee Ownership Representation Act on Wednesday.

Unlike defined contribution plans, in which the amount contributed is determined by the employee, ESOP contributions reflect the growth of the company, rather than planned contributions by the employee or employer. ESOPs often supplement a 401(k) plan.

However, according to Employee Ownership Fairness Act bill proposal, Sections 404 and 415 of the Internal Revenue Code impose limits on benefits and contributions under qualified plans, which in turn “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.”

As a result, the bill proposes amending the Employee Retirement Income Security Act to no longer include ESOP contributions under the total annual DC plan contribution limits. The bill explains that employees participating in an ESOP are often unable to make full use of their DC plans if their growing ESOP balance causes other plan contributions to exceed the annual cap. Currently, both employee and employer contributions count toward the annual limit, which is $23,500 for 2025.

The second bill, the Employee Ownership Representation Act, proposes that the secretary of labor nominate two new ESOP board members to the ERISA Advisory Council. According to the bill, the nominations should occur no later than one year after the act’s enactment. The ERISA Advisory Council currently consists of 15 members appointed by the secretary of labor, and the new bill would amend ERISA to include 17 members.

Cassidy wrote in a press release that this would finally give ESOPs representation on the council to advocate for the interests of employee-owned companies.

Both bills were referred to the HELP Committee.

Hillary Abel was appointed as head of the Department of Labor’s Division of Employee Ownership in July 2024. She was recently terminated and then reinstated to the position amid President Donald Trump’s efforts to drastically downsize the federal government.

Another bill, the American Ownership and Resilience Act, was introduced in both the House of Representatives and the Senate last week and would “enable the sale of American businesses to American workers through an ESOP plan by equipping the U.S. Department of Commerce with a zero-subsidy investment facility.”

The bill is intended to “prevent the offshoring of American manufacturing, enhance supply chain resiliency, keep businesses American-owned and operated and enable American workers to build substantial retirement assets,” according to a press release issued by Representative Blake Moore, R-Utah, who introduced the bill along with a bipartisan group of lawmakers, including Representative Lori Trahan, D-Massachusetts, and others.

The bill is intended to make it easier for retiring business owners to exit their business by selling it to their employees through an ESOP.

In January, prior to Trump’s inauguration, the Department of Labor issued a proposed regulation aimed at clarifying the meaning of the phrase “adequate consideration” regarding the valuation of employer stock in ESOP transactions, as required under ERISA. The proposal seeks to strengthen protections for participants, while providing fiduciaries with guidance on determining the fair market value of employer stock in these transactions. This rule was withdrawn via executive order because they had not yet been published in the Federal Register.