State Reps. Valerie Gaydos (R-Allegheny) and Daryl Metcalfe (R-Butler) recently participated in a discussion with financial experts and Nicklas Plumbing in Cranberry Township on Employee Stock Ownership Plans (ESOPs).
Workers do not pay anything to participate in an ESOP plan, and the profits from the employee-owned portion of an ESOP business are tax-free.
ESOP employees earn 5 percent to 12 percent more in wages. They have 2.5 percent greater retirement account balances, according to the National Center for Employee Ownership, and ESOP-owned employers are 25 percent more likely to stay in business.
“ESOPs serve the dual purpose of delivering real retirement savings and stock ownership for employees, as well as the potential of a tax-free exit strategy to keep family-owned businesses in the family,” Metcalfe said. “Additionally, employees contribute absolutely nothing out of pocket or paycheck for this outstanding benefit. The purpose of my legislation is to increase the incentive for family-owned businesses and other employers to sell their business to an ESOP rather than outsiders whose intentions and the fate of current employees are always unknown.”
Metcalfe authored and Gaydos co-sponsored House Bill 285. The legislation would apply certain provisions of the federal tax code at the state level. Eligible business owners who sell their stock to an ESOP would be permitted to indefinitely defer and possibly eliminate the capital gains taxes collected when a business is sold.