Sponsor
Scott Perry
Representative · R-PA
Representative · R-PA
The bill makes it easier and more attractive for employers to use ESOPs—expanding employee ownership and reducing administrative uncertainty—but increases taxpayer cost, raises employee investment-concentration risks, and could weaken some uniform retirement protections while creating compliance costs for employers.
Employees and middle-class families (and the small businesses that employ them) gain greater ownership and retirement benefit recognition as ESOP-held company stock and employer contributions are treated more favorably, aligning worker and owner incentives.
Small businesses and employee participants can more easily create or expand ESOPs because loan-repayment contributions and forfeitures can be used more flexibly without hitting annual addition limits, lowering a barrier to employee ownership financing.
Employers, plan administrators, and financial institutions face less tax and administrative uncertainty due to clarified application of section 404 to ESOPs (separate application), which may preserve employer matching contributions and simplify plan design decisions.
Taxpayers could face reduced federal revenue or new tax expenditures if the tax code is changed or interpreted to favor ESOP treatment, increasing pressure on deficits or requiring offsets.
Employees and middle-class families may experience increased investment-concentration risk if firms rely more on company stock for retirement savings, raising the chance of large retirement losses tied to employer performance.
Changes that relax how ESOP contributions/forfeitures are treated could weaken uniform retirement protections or allow unequal benefit accruals that favor business owners over non-owner employees.
Based on analysis of 3 sections of legislative text.
Excludes ESOP employer-stock and loan-repayment contributions and ESOP forfeitures from certain ERISA/IRC contribution and annual-addition limits, and separates 404 treatment for ESOPs.
Official title: 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.
Introduced July 20, 2026 by Scott Perry · Last progress July 20, 2026
Directs ERISA and the Internal Revenue Code to treat ESOP employer stock contributions and employer contributions used to repay ESOP acquisition loans differently for contribution and annual-addition limits. It excludes those ESOP-specific contributions and forfeitures from certain employer deduction and defined-contribution aggregation limits so ESOPs do not push participants against other plan contribution caps. Changes apply to plan years beginning after enactment.