Bill Overview
Title: To amend the Internal Revenue Code of 1986 to treat certain price protection payments as eligible rollover distributions, and for other purposes.
Description: This bill treats certain price protection payments from Employee Stock Ownership Plans (ESOPs) as eligible rollover distributions (i.e., tax-free distributions from a qualified retirement plan to another eligible plan). Price protection payments are made under a price protection agreement and provide a guaranteed minimum price for shares that may temporarily decline in value as a result of loans to the ESOP to purchase shares. The bill treats price protection payments made after December 12, 2019, for plan years ending before January 1, 2023, as eligible rollover distributions if payments were made pursuant to a price protection agreement for distributions due to separation from service, retirement, death or disability. For plan years beginning after 2022, payments made under a price protection agreement as a result of any separation of service of a plan participant (regardless of the reason for such separation) would be eligible for rollover.
Sponsors: Rep. Kind, Ron [D-WI-3]
Target Audience
Population: Individuals participating in ESOPs eligible for price protection payments
Estimated Size: 1800000
- The bill specifically addresses Employee Stock Ownership Plans (ESOPs).
- Price protection payments are currently not treated as tax-free rollovers according to the Internal Revenue Code of 1986.
- The change will particularly benefit individuals participating in ESOPs who are experiencing or have experienced a separation from service, retirement, death, or disability.
- This benefits individuals by allowing them to roll over price protection payments tax-free, potentially benefiting their long-term retirement security and financial wellbeing.
- ESOPs are not limited to a specific industry and can be part of a wide range of organizations, potentially affecting a broad segment of the workforce involved in these plans.
Reasoning
- The bill is targeted towards individuals participating in ESOPs with price protection agreements, which may include regular employees, executives, and retirees across various industries.
- Given that ESOPs are prevalent in medium to large-sized businesses, the policy impacts might be more pronounced among these groups.
- The policy's intent is to enhance financial security by allowing tax-free rollovers which can positively affect long-term retirement planning and wellbeing.
- A large proportion of the target population might not be immediately impacted, thus the actual visible impact of the policy might range from low to medium for most.
- Considering the budgetary constraints, we are assessing a relatively small subset of the overall potential target populace for substantive wellbeing impact.
Simulated Interviews
Senior Engineer (Chicago, IL)
Age: 45 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 15.0 years
Commonness: 12/20
Statement of Opinion:
- I think the policy is a good way to secure our investments in the ESOP without an immediate tax burden.
- I'm hopeful it will shield us from short-term market fluctuations when we need to separate from the company.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 9 | 8 |
| Year 10 | 9 | 8 |
| Year 20 | 8 | 7 |
Retired financial advisor (Dallas, TX)
Age: 60 | Gender: female
Wellbeing Before Policy: 8
Duration of Impact: 20.0 years
Commonness: 5/20
Statement of Opinion:
- This change makes it easier for retirees like myself to manage tax implications from sudden stock price changes.
- It could provide more stability in my financial planning during retirement.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 9 | 8 |
| Year 2 | 9 | 8 |
| Year 3 | 9 | 8 |
| Year 5 | 10 | 9 |
| Year 10 | 9 | 8 |
| Year 20 | 9 | 8 |
Software Developer (San Francisco, CA)
Age: 50 | Gender: male
Wellbeing Before Policy: 9
Duration of Impact: 5.0 years
Commonness: 7/20
Statement of Opinion:
- While useful, I don't anticipate needing the rollover soon given my current job stability.
- May consider it as a safeguard for potential future employment transitions.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 9 | 9 |
| Year 2 | 9 | 9 |
| Year 3 | 9 | 9 |
| Year 5 | 9 | 9 |
| Year 10 | 8 | 8 |
| Year 20 | 8 | 8 |
Marketing Specialist (New York, NY)
Age: 30 | Gender: other
Wellbeing Before Policy: 7
Duration of Impact: 0.0 years
Commonness: 11/20
Statement of Opinion:
- This policy doesn't impact me now but it's a relief to know I'll have that option if things change.
- I see it as a future benefit as my career evolves.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 7 | 7 |
| Year 10 | 7 | 7 |
| Year 20 | 7 | 7 |
Operations Manager (Seattle, WA)
Age: 55 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 12.0 years
Commonness: 10/20
Statement of Opinion:
- The ability for a tax-free rollover is appealing as it gives me room to plan better for retirement.
- Hopefully, it creates a smoother transition when I'm ready to leave the workforce.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 7 | 7 |
| Year 5 | 8 | 6 |
| Year 10 | 8 | 6 |
| Year 20 | 7 | 6 |
Educational Administrator (Boston, MA)
Age: 58 | Gender: male
Wellbeing Before Policy: 8
Duration of Impact: 0.0 years
Commonness: 15/20
Statement of Opinion:
- I don't see a personal impact, but I understand it might help those with volatile stock values in their portfolios.
- It could support my family if they face financial instability from job changes.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 8 | 8 |
| Year 5 | 8 | 8 |
| Year 10 | 8 | 8 |
| Year 20 | 8 | 8 |
Healthcare Worker (Austin, TX)
Age: 34 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 10.0 years
Commonness: 8/20
Statement of Opinion:
- I'm curious about whether this policy will apply under future employment circumstances.
- It's an extra safety net for people like me changing careers within ESOP structures.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 7 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 6 | 6 |
Project Manager (Denver, CO)
Age: 29 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 0.0 years
Commonness: 9/20
Statement of Opinion:
- It looks like a prudent policy but doesn't affect my current situation directly.
- In fast-growing companies like mine, it's good to prepare for future scenarios where this might apply.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 7 | 7 |
| Year 10 | 6 | 6 |
| Year 20 | 7 | 7 |
Restaurant Owner (Minneapolis, MN)
Age: 39 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 10.0 years
Commonness: 6/20
Statement of Opinion:
- This might level the playing field for small businesses like mine in terms of financial planning for our employees.
- I'm optimistic that the rollover provision will avert financial stress from short-term market issues.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 7 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 8 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 6 | 5 |
Construction Worker (Miami, FL)
Age: 63 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 20.0 years
Commonness: 4/20
Statement of Opinion:
- I welcome any policy that safeguards my financial standing from unnecessary taxation.
- It appreciates the risks people in my position face with market fluctuations, especially during retirement.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 6 |
| Year 2 | 8 | 6 |
| Year 3 | 8 | 6 |
| Year 5 | 9 | 7 |
| Year 10 | 8 | 6 |
| Year 20 | 8 | 6 |
Cost Estimates
Year 1: $10250000 (Low: $8500000, High: $12000000)
Year 2: $10500000 (Low: $8750000, High: $12250000)
Year 3: $11000000 (Low: $9000000, High: $12500000)
Year 5: $11500000 (Low: $9250000, High: $13000000)
Year 10: $12500000 (Low: $9500000, High: $13500000)
Year 100: $20000000 (Low: $15000000, High: $25000000)
Key Considerations
- The policy affects a specific and defined group of ESOP participants who have experienced or will experience certain separation events.
- Projected costs and savings are highly contingent on the number of active ESAOPs and the occurrence of distributing events (i.e., job separations or retirements).
- The bill primarily impacts the timing of cash flows and tax collections within the federal government rather than creating direct new expenditures.