S. 2458 — Employee Ownership Financing Act

This section defines terms used in the Act, including (1) Director, as the Director of the Office of Employee Ownership; (2) eligible worker-owned cooperative, as given in section 1042(c)(2) of the Internal Revenue Code of 1986; (3) employee stock ownership plan, as given in section 4975(e)(7) of the Internal Revenue Code of 1986; (4) Office, as the Office of Employee Ownership; and (5) Secretary, as the Secretary of Labor.

This section establishes the Office of Employee Ownership within the Department of Labor, outside the Employee Benefits Security Administration, not later than 90 days after enactment of this Act. The office director, appointed by the Secretary of Labor, may hire necessary staff and is responsible for (1) carrying out the Employee Ownership Initiative (29 U.S.C. 3228)—which promotes employee ownership by supporting state programs through federal grants and information dissemination—and (2) administering the Employee Ownership Loan Program under section 4.

This section establishes an Employee Ownership Loan Program, to be carried out by the Director, to provide loans or loan guarantees to eligible entities—defined as an employee stock ownership plan (ESOP), eligible worker-owned cooperative, or qualified trust under IRC §401(a) on behalf of such entities (excluding any primarily owned by a private equity firm)—to foster increased employee ownership of U.S. companies and greater employee participation in decision-making. Loans or guarantees may be used (1) to purchase equity in a company to make it at least 51% employee-owned; (2) to increase employee ownership in a company below 51% employee-owned to at least 51%; (3) to increase employee ownership in a company already at least 51% employee-owned; or (4) to expand operations, increase, or preserve employment in a company at least 51% employee-owned. Loans bear interest at the lesser of a cost-of-borrow/loss-covering rate or the applicable market rate (as determined by the Secretary in consultation with the Director), have repayment periods up to 15 years, and comply with the Internal Revenue Code and ERISA; such loans may be subordinated to ESOP or cooperative participants' interests in bankruptcy if appropriate. Eligible entities must submit a business plan demonstrating, for ESOPs, at least 51% equity ownership by the plan with full trustee voting rights per IRC §409(e), at least two independent directors on the company board, establishment within one year of a committee (at least 50% non-officer employees) to develop a plan for meaningful employee involvement (e.g., workplace democracy, open-book management), a diversified retirement investment option, and quarterly employee information on company progress; for worker-owned cooperatives, a board elected on a one-member-one-vote basis; and, for both, an independent third-party study with a fair market valuation and determination of sufficient cash flow for repayment. This section further establishes the Employee Ownership Loan Program Fund as a revolving fund in the Treasury for deposits of loan repayments and collections, with amounts available to the Director without further appropriation.

This section amends the Worker Adjustment and Retraining Notification (WARN) Act (29 U.S.C. 2102) to require employers to include in plant closing notices (i.e., permanent shutdowns of entire facilities affecting 50 or more employees) an offer for affected employees to purchase the plant, facility, or company through (1) an employee stock ownership plan (ESOP) sponsored by a company that is at least 51% employee-owned or (2) an eligible worker-owned cooperative, with fair market value determined by an independent third-party appraisal paid for by the employer and required disclosures of liabilities, financial statements, legal claims, and similar information; and requires the facility to remain open during good faith purchase negotiations entered within 60 days of notice and for at least 30 days following any purchase closing date. It further exempts such ESOP purchases and operations from ERISA prohibited transactions under sections 406 and 407 (29 U.S.C. 1106, 1107) by adding a new exemption in section 408(i) (29 U.S.C. 1108(i)) and makes conforming exemptions and amendments to Internal Revenue Code prohibited transactions rules in sections 4975(d)(26) and 4975(f)(6) (26 U.S.C. 4975).

This section establishes a seven-member Advisory Council on Employee Ownership, appointed by the Secretary, with four members representing employees; one representing companies with an employee stock ownership plan (ESOP) or eligible worker-owned cooperative; one representing ESOP providers; and one representing associations or membership organizations for ESOPs or eligible worker-owned cooperatives (no more than four members from the same political party). Council members serve two-year terms (reappointable), with vacancies filled for the remainder of the term; a majority constitutes a quorum. The council advises the Secretary on implementation of the Act, submits annual recommendations via reports, and meets at least quarterly at the Secretary's direction; the Secretary provides an executive secretary, services, and federal data support, with members compensated at the daily equivalent of level IV of the Executive Schedule plus travel expenses. This section exempts the council from the termination provisions of 5 U.S.C. §1013 (i.e., the Federal Advisory Committee Act requirement that advisory committees terminate after two years unless renewed by the President, agency head, or law, with successive charter filings). (Thus, the council operates indefinitely without periodic renewal or charter refiling.)

This section authorizes appropriations to the Employee Ownership Loan Program Fund established under section 4 as follows: (1) $500 million for FY2026, to remain available until expended, for loans or loan guarantees during FY2026 and subsequent fiscal years; (2) $5 million for FY2026, to remain available until September 30, 2026, for administrative costs in establishing the program; and (3) such sums as necessary for FY2027 and each subsequent fiscal year for administrative costs in carrying out the program. The section also authorizes appropriations of such sums as necessary to the Secretary to carry out other provisions of the Act.