S. 1727 — Employee Ownership Fairness Act of 2025

This section states congressional findings on employee stock ownership plans (ESOPs), including their origins under the Employee Retirement Income Security Act of 1974 and the Tax Reform Act of 1984 as incentives for economic growth and investment; their role in empowering workers with ownership stakes, aligning incentives, and financing business acquisitions; and limitations under IRC §§ 404 and 415 that restrict diversification of retirement savings and employer matching contributions due to company success increasing ESOP balances.

This section establishes special rules for employee stock ownership plans (ESOPs)—retirement plans designed to invest primarily in employer securities—under ERISA and the Internal Revenue Code by (1) excluding contributions of employer stock or to repay loans used to acquire employer securities from the deductible contributions limit under IRC §404(a)(3)(A), (2) applying IRC §404 limitations separately to ESOPs and any other defined contribution plans of the employer, (3) excluding such contributions from annual additions under IRC §415(c)(2), and (4) excluding forfeitures allocated to ESOP participant accounts from annual additions under new IRC §415(o). The amendments apply to plan years beginning after the date of enactment.