“ERISA” is not a household word for most Americans, but it directly touches the lives of America’s workers and their families. Because of ERISA (the Employee Retirement Income Security Act), which was signed into law 50 years ago in September 1974, every benefit promise of private employment-based health and retirement plans, and every dollar of plan assets, are safeguarded by plan fiduciaries who must adhere to stringent obligations that are often characterized as the highest duties known to the law.
The Employee Benefits Security Administration (EBSA), which I oversee as the Assistant Secretary for Employee Benefits Security at the DOL, is responsible for making sure that employees benefit from the fiduciary protections and retirement security that ERISA safeguards. EBSA is a small agency with the big mission of protecting the interests of more than 153 million workers in over 4.1 million retirement, health, and other plans across the country. EBSA is dedicated to promoting strong fiduciary conduct; providing guidance to employers, benefit plan sponsors, fiduciaries, and plan service providers; providing outreach and education to workers and their families about their job-based benefits; and assisting the public when they have problems accessing their benefits. In fiscal year 2023 alone, EBSA recovered over $1.4 billion for retirement and health plans and their participants and beneficiaries through our enforcement program and informal complaint resolution.
Both ERISA and EBSA play an important role in the employee ownership context, and that role is taking on new and exciting responsibilities and opportunities. While employee ownership predates ERISA and EBSA, employee stock ownership plans (ESOPs) are employee retirement benefit plans under ERISA, and as such are subject to ERISA’s protections and obligations and EBSA’s oversight. At their best, ESOPs give workers valuable retirement benefits and an invaluable financial and psychological stake in the company. As with all retirement plans, ESOP fiduciaries have obligations under ERISA that are vital to the safety and security of workers’ benefits: to act with prudence and undivided loyalty to the plan’s participants and beneficiaries. They must make sure that the purchase, sale, and ongoing management of employer stock are always done for the benefit of the plan participants and beneficiaries (the employee-owners). They can never sacrifice the interests of these participants and beneficiaries for the sake of promoting the interests of selling business owners or anyone else. When ESOP fiduciaries take these duties seriously, as they commonly do, workers benefit both from the fiduciary protections common to all retirement plans and from their unique stake in their employer.
EBSA shares the same goal as plan fiduciaries: to ensure that the worker-protective promise of retirement plans becomes and remains a reality. This is the north star of EBSA’s enforcement and compliance programs. We are working together with the employee ownership community to develop additional guidance to help ESOP fiduciaries and the professionals who guide them to deliver on that promise.
The past year and a half has brought a new and exciting expansion to the DOL’s role in worker ownership with the launch of our Employee Ownership Initiative in June 2023, in accordance with the Worker Ownership and Readiness and Knowledge (WORK) Act, which was championed by the employee ownership community for years and made part of the SECURE 2.0 law signed at the very end of 2022. Our new Division of Employee Ownership, within our Office of Outreach, Education, and Assistance, is creating programs to encourage all forms of broad-based employee ownership, as well as worker voice and engagement in employee-owned companies, and we look forward to working within the DOL to provide grants to support employee ownership if appropriated by Congress. Our Office of Regulations and Interpretations is working hard to develop formal guidance on the valuation of employer stock in the context of ESOPs. And our Office of Enforcement continues to act when ESOPs do not provide the protections that ERISA mandates and helps ensure that ESOPs provide their intended benefits.
In honor of ERISA’s 50th, we celebrate that ESOPs are powerful vehicles for retirement security, and we know that the promise of employee ownership is even bigger than the current reality. Given our mission at the DOL, we are excited to work together with all of you to promote employee ownership structures that can create quality jobs, safe and engaging workplaces, and economic security for millions more American workers. After I personally spent almost 30 years advocating for workers and representing benefit plans prior to coming into my current role, I’ve been thrilled to be able to lead EBSA into this new chapter and meet with so many worker-owners and members of the employee ownership community, visiting workplaces across the country and hearing our stories and your viewpoints about how we can work together to ensure that the options of employee ownership are known and understood and that the promises made are kept, so that everyone wins.