Employee Ownership Fairness Act of 2025

The "Employee Ownership Fairness Act of 2025" proposes amendments to the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code to improve benefits for participants in Employee Stock Ownership Plans (ESOPs). The bill addresses a problem where the growth and success of an ESOP can inadvertently limit an employee's ability to contribute to and fully benefit from other defined contribution retirement plans, like 401(k)s, due to existing annual contribution and deduction limits. To resolve this, the legislation introduces several key changes. It specifies that contributions of employer stock and contributions used to repay ESOP loans will not be counted towards employer deduction limits under Section 404(a)(3)(A) of the Internal Revenue Code, and these limits will be applied separately to ESOPs and other defined contribution plans. Furthermore, the bill modifies Section 415(c)(2) by excluding these same employer contributions and forfeitures allocated to ESOP accounts from the calculation of annual additions, ensuring that ESOP participants can fully realize their ownership benefits while maximizing personal retirement savings in other plans.