Des Moines Sun

Employee Stock Ownership Plans (ESOPs) are being highlighted as a key succession planning tool for small, family-run businesses. ESOPs allow business owners to sell shares to their employees through a tax-advantaged retirement plan. This arrangement provides workers with an ownership stake, which supporters say increases productivity and loyalty while helping employees grow their retirement savings.

Senator Chuck Grassley discussed the role of ESOPs in local economies, noting that many Iowa businesses face ownership transitions in the coming years. He stated, "At my annual 99 county meetings, I often hear from family-run businesses and employees who strongly support ESOPs. They say it boosts company morale and generates civic pride in the business and their local community. What’s more, the owners are thrilled to see their lifelong business continue to thrive and stay in local hands."

Grassley emphasized that workforce shortages and employee retention are recurring concerns raised during his county meetings.

To address challenges faced by small businesses establishing ESOPs, Grassley is cosponsoring the Promotion and Expansion of Private Employee Ownership Act. "As a former chairman of the tax-writing Senate Finance Committee, I understand the federal tax code serves as a vehicle to foster economic growth, influence business decisions and consumer behaviors and grow retirement savings," he said.

He explained that the bipartisan bill aims to simplify the process for small businesses by removing barriers related to tax code complexity and regulatory requirements. The legislation focuses on improving incentives for S corporations—businesses where income is passed directly to owners rather than taxed at the corporate level—to set up ESOPs. Over half of U.S. small firms use this structure.

Grassley outlined several provisions: providing technical assistance for forming ESOPs, ensuring continued Small Business Administration certification, maintaining ESOP support within federal law, and creating an Employee Ownership Advocate at the Department of Labor.

"Simply put, the federal tax code should not stand in the way of small, family-owned businesses from setting up ESOPs for their employees," Grassley said.

He also referenced speaking at last year’s Iowa CEO Employee Ownership Conference in Ankeny and affirmed his commitment to supporting small businesses through ongoing engagement across Iowa.