The Verit View – July 2014
The Good Coming Out of Washington
Verit Advisors’ view is that the House’s recently introduced bill (H.R. 4837) represents “the good” coming out of Washington in the midst of continued political frustration and in-fighting. This type of bi-partisan collaboration will continue to stimulate jobs, communities and create meaningful retirement savings.
Promotion and Expansion of Private Employee Ownership Act of 2014 (H.R. 4837)
On June 11, 2014 House Ways and Means Committee members Dave Reichert (R-WA), Ron Kind (D-WI), Erik Paulsen (R-MN), Earl Blumenauer (D-OR), Pat Tiberi (R-OH), Richard Neal (D-MA), Charles Boustany (R-LA) and Bill Pascrell (D-NJ), introduced legislation designed to enable greater employee-ownership in the private sector through S corporation ESOPs. Congressman Tiberi and Congressman Neal serve respectively as the lead Republican and lead Democrat of the tax subcommittee of the Ways and Means Committee. This bill represents the House companion to a Senate version that was introduced in 2013 by Senate Finance Committee Members Ben Cardin (D-MD) and Pat Roberts (R-KS). H.R. 4837 would amend the Internal Revenue Code of 1986 and the Small Business Act to expand the availability of ESOPs in S corporations.
Alex Brill, an advisor to the Simpson-Bowles bipartisan deficit reduction commission and a fellow with the American Enterprise Institute, highlighted the growth of ESOPs over the past decade in the study – An Analysis of the Benefits S ESOPs Provide the U.S. Economy and Workforce. The Brill study demonstrated through the analysis of data from the Department of Labor and the Bureau of Labor Statistics that S ESOP companies have contributed to higher wages, wage growth, job stability and higher retirement plan contributions – all critical issues that continue to plague the American workforce and broader economy. It was very exciting that the study found S ESOP companies demonstrating substantially more employment growth and an ability to regain financial momentum faster in the pre-2008 recession period than private businesses. The study highlighted that on net, employment among the surveyed firms increased over 60 percent during 2001-2011, compared to roughly no change in total private, nonfarm employment in the United States during the same period.
As Rep. Kind of the House Ways and Means Committee commented, “Growing our economy and adding jobs is a priority and employee-ownership is a proven model to do just that.” Verit is excited that Washington D.C. is taking notice of the evidence through this proposed legislation, which will preserve jobs, drive employment and generate retirement savings.
Verit continues to work closely with privately-held businesses around succession alternatives that will advance, preserve and support American communities.
As always it is Verit’s vision to bring a fresh approach and customized solutions to advise private business owners on ownership transition.