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December 2025 | The Voice of The ESOP Association | Serving the Entire ESOP Community

Employee Owned 2025: A Transformative ESOP Experience

Time e h t s i w No Your w e n e R to EA Annual T hip! s r e b m e M

The Voice of The ESOP Association The ESOP Report is published on a monthly basis by The ESOP Association, the national non-profit association of employee-owned companies and ESOP practitioners, located at: The International Employee Ownership Center 200 Massachusetts Avenue NW, Suite 410 Washington, DC 20001 Phone: (202) 293-2971 • Toll Free: (866) 366-3832 • Fax: (202) 293-7568 E-mail: media@esopassociation.org Website: https://www.esopassociation.org Subscriptions are included in annual membership dues. The articles within represent the views of the authors and may not be the views of The ESOP Association. No part of this publication may be reproduced without prior written permission. All rights reserved, 2025. Publisher: James J. Bonham, President and CEO Editor: Greg Facchiano, Vice President of Government Relations and Public Affairs Board of Directors: Chair: Derrick Vick • President, Freedom Industries, Inc. Vice Chair: Steve Earle • Vice President of Kitchen Operations, Mid South Building Supply Inc. Secretary/Treasurer: Becky Streff • Vice President of People Operations, Holden Industries, Inc. Immediate Past Chair: Karen L. Ellis • Executive Vice President of Human Resources, Superior Farms/ Transhumance Holding Company At Large Members: At-Large Representative from the Public Policy Council: Gary Shorman • President, Eagle Media At-Large Professional Representative: Peter Jones • Counsel, Tucker Ellis, LLP Corporate At-Large Member: Connie Burnette • Vice President, Department Manager, Human Resources, Wiley|Wilson Chair, State & Regional Chapter Council: Brian Bowers • President & CEO, Bowers + Kubota Consulting, Inc. Chair, Public Policy Council: Ben Holder • CEO, Plastic Products Company, Inc. Chair, Advisory Committees Chairs’ Council: Cara Benningfield • Partner, Forvis Mazars Chair, Employee Ownership Foundation: Peter Ney • Executive Vice President, Treasurer and Director, EA Engineering, Science, and Technology, Inc., PBC

Inside this issue: The ESOP Association Transfers to a Calendar Year Membership

Update Your TEA Membership Information

Employee Owned 2025: A Transformative ESOP Experience

Congratulations to the 2025 AACE Award Winners!

TEA's Professionals' Forum: Book Your Spot in Charleston Today!

Transforming ESOP Education: A Vision for 2026 and Beyond

Expanding the Celebration of Employee Ownership Month

An Existential Danger to ESOPs

Cash for College! A Scholarship for Employee Owners or Their Dependents

Welcome Krista Candela to The ESOP Association's Team!

Accelerating Ownership: A Year of Growth and Impact in 2025

TEA Chapter & Regional Events

Professional Development: Rethinking Your ESOP's Provisions

Professional Development: Leasing Depreciable Property to an ESOP-Owned S Corporation? You Probably Recognized Too Much Depreciation...

Minnesota/Dakotas Chapter 2025 Strategic Planning Activity

Check out pages 26-27 for a Chapter event near you! 2

MEMBERSHIP

The ESOP Association Transfers to a Calendar Year Membership The ESOP Association, at the direction of the Board of Directors, has been undergoing a change to update the Association’s membership term from an anniversary renewal to a uniform calendar renewal in 2025. Historically, each member has renewed their membership on the anniversary of their original join date. However, in response to strong interest among our members, the Association has been transitioning all membership renewals to end on December 31, 2025. All members will then begin a calendar year membership in 2026. We’ve heard from many of our ESOP members that aligning their renewal to a January – December term would make their budgetary planning easier, allowing them to plan to renew the first of each year or use funds remaining in the current year to renew their membership for the following year. TEA’s professional services firms, many of whom have multiple staff members with membership renewals throughout the year, have also requested we align their memberships to all come due at the same time. This calendar year renewal will make it easier for professional members to plan their annual budgets, while eliminating the need to track down invoices throughout the year. Beginning in October 2025, all TEA members have begun receiving their 2026 calendar year (January - December) membership renewal invoices. If you have any questions regarding your invoice, please reach out to membership@ esopassociation.org

Update Your TEA Membership Information The ESOP Association’s membership team kindly reminds our valued members to please take a moment to review your ESOP’s information on file with us and ensure it is up to date. Keeping your information current ensures you and your employee owners receive timely communications, personalized updates, and full access to The ESOP Association’s comprehensive membership benefits.

To review your information, please log in to your membership portal and verify: • Company details • Verification on who should receive your membership renewal • Membership roster: o Please be sure you have your C-Suite employee owners, your ESOP Committee members, and anyone else you would like to receive membership benefits including discounted meetings, access to chapter notifications, and access to the HUB, etc. o To add individuals, click “Add”. If you need to remove any individuals, all you have to do is send a list of names to membership@esopassociation.org Thank you for your help. If you have any questions, please email membership@esopassociation.org or call 202-293-2971.

December 2025 | 3

Employee Owned 2025: A Transformative ESOP Experience The ESOP Association’s Employee Owned 2025 was nothing short of extraordinary. To our attendees, speakers, and sponsors, thank you for helping make EO25 one of the most impactful events in TEA’s history. Our new home at the ARIA in Las Vegas delivered a bigger, bolder, and truly transformative experience. A Celebration to Remember

A Knockout Opening Keynote

EO25 kicked off Sunday evening, November 2nd, with a combined celebration of Employee Ownership and the Annual Awards for Communications Excellence (AACE Awards). The energy was high from the start, thanks to actor and comedian Kevin Pollak, whose sharp humor, celebrity impressions, and behind-the-scenes stories kept the room roaring. (See page 7 for a full AACE Awards recap!)

On Monday morning, EO25 officially began with a dazzling keynote address by American legend Sugar Ray Leonard. Sugar Ray wowed the crowd with his tales of perseverance, resilience, and relentless pursuit of excellence that made him one of the most beloved sports figures of all time. His positive message and infectious attitude captivated the audience and launched this year’s conference on an inspiring high note.

Emcee Kevin Pollak

Keynote Speaker Sugar Ray Leonard

Around the World Sponsor Showcase

Keynote Speaker Stefanie Couch

Keynote Speaker Michael Easter

More Content That Matters to You

ESOP Education Gets an Upgrade

Our expanded conference footprint at the ARIA enabled something new: concurrent general sessions. With two dynamic options running side by side, attendees could tailor their EO25 experience like never before.

Beyond more than 100 sessions, roundtables, and executive discussions, EO25 delivered two immersive workshops focused on HR/Communications and Finance—each built for how adults learn best. These hands-on, applicationdriven workshops moved beyond traditional lectures to ensure maximum knowledge retention. More workshops are coming in 2026—be sure to read Jim Bonham’s column on page 13 for what’s next.

Monday’s lunch featured a standout Women in ESOPs panel on elevating women’s leadership and visibility, while the simultaneous session offered an in-depth look at macroeconomic trends shaping ESOP companies. On Tuesday morning, attendees chose between keynote speaker Stefanie Couch’s powerful “How to Win at Anything” presentation or a high-level cybersecurity panel. That afternoon, participants dove into either a compelling session on how brands earn trust with Stephanie Crockett or an expert discussion on ESOP mergers and acquisitions.

A Strategic Look Ahead On Wednesday, TEA President and CEO Jim Bonham delivered a forward-looking keynote outlining the Association’s upcoming education initiatives and providing an important update on rising private-equity interest in ESOPs. For those who missed it, Jim’s full remarks are available on our YouTube page.

New Special Events Make Their Mark EO25 delivered an elevated, upscaled experience, from the stunning new conference space and guest rooms at the ARIA, to our educational offerings, and our revamped networking and social events! Attendees especially loved the Around the World Sponsor Showcase, which featured food and fun from across the globe. Our sponsors truly embraced the event’s spirit, delighting guests with authentic cuisine, refreshing drinks, and engaging games inspired by their respective countries. To wrap up Employee Owned 2025, TEA would like to thank our many sponsors for your generosity and support. We couldn’t do it without you! As we head into December, the team at TEA wishes everyone a happy and healthy holiday season, and we look forward to seeing you at one of our many national and chapter events in 2026!

Women in ESOPs Panel

Jim Bonham, President & CEO, The ESOP Association

December 2025 | 5

THANK YOU TO OUR SPONSORS STRATEGIC PARTNERS

PLATINUM SPONSORS

The Capital ESOP Group UBS Financial Services Inc.

GOLD SPONSORS

ButcherJoseph & Co

The DVS Group

Faegre Drinker

First Bank of the Lake Pilot Hill Adamy Valuation LLC

KPH/ProAct SES ESOP Strategies - A Stevens & Lee Company Voya Financial

Empire Valuation Consultants, LLC Guttman Energy RSM US

Stokastique

Village Labs

Weaver

Wells Fargo

SILVER SPONSORS

Acclaro Valuation Advisors

Alerus Financial

BPAS Plan Administration & Record Keeping Services

Certified Employee-Owned

ESOP One

ESOP Partners

Husch Blackwell

Krieg DeVault, LLP

Menke & Associates

Monarch Investment Partners

Morgan, Lewis & Bockius LLP

PenChecks, Inc.

Praxis

Roorda, Piquet & Bessee, Inc. CPAs

Travel Store, Inc.

Congratulations to the 2025 AACE Award Winners! The AACE Awards honor and celebrate outstanding achievements in ESOP and employee ownership communications. Effective communication and engagement with employee owners and the broader community play a vital role in every ESOP’s success. In November 2025, the Employee Owned Conference in Las Vegas recognized this year’s winners. Judges select winners in seven categories: video, print materials, intranets, community engagement, single event, series of events, and total communications. They evaluate entries from two groups: companies with fewer than 250 employees and companies with 250 or more employees. And the winners are….

Video ESOPs under 250 employees:

ESOPs with 250 or more employees:

Runner Up: Gemini Industries, Inc. Texas/Oklahoma Chapter

Runner Up: Guttman Energy Pennsylvania/Delaware Chapter

Winner: Parman Holdings Southeast Chapter

Winner: Perry Pro Tech Ohio/Kentucky Chapter

December 2025 | 7

Print Materials ESOPs under 250 employees:

ESOPs with 250 or more employees:

Runner Up: Roloff Construction Iowa/Nebraska Chapter

Runner Up: Team Kline Iowa/Nebraska Chapter

Winner: Mountain Hardware & Sports California/Nevada Chapter

Winner: Pavement Recycling California/Nevada

Intranets ESOPs under 250 employees:

ESOPs with 250 or more employees:

Runner Up: Moore Engineering Northwest Chapter

Runner Up: AVION Solutions Southeast Chapter

Winner: Williams Company Florida Chapter

Winner: Creative Financial Staffing New England Chapter

Community Engagement ESOPs under 250 employees:

ESOPs with 250 or more employees:

Runner Up: Erickson Hall Construction California/Nevada Chapter

Runner Up: KE&G Construction Rocky Mountain Chapter

Winner: Freedom Industries Mid-Atlantic & Carolinas Chapter

Winner: Team Kline Iowa/Nebraska Chapter

Single Event ESOPs under 250 employees:

ESOPs with 250 or more employees:

Runner Up: Nobis Group New England

Runner Up: Control Air California/Nevada

Winner: Wiley|Wilson Mid-Atlantic & Carolinas

Winner: Lochmueller Group Indiana Chapter

December 2025 | 9

Series of Events ESOPs under 250 employees:

ESOPs with 250 or more employees:

Runner Up: Mountain Hardware & Sports California/Nevada Chapter

Runner Up: KE&G Rocky Mountain Chapter

Winner: Pile Dynamics Ohio/Kentucky Chapter

Winner: Folience Iowa/Nebraska

Total Communications ESOPs under 250 employees:

ESOPs with 250 or more employees:

Runner Up: Mountain Hardware & Sports California/Nevada Chapter

Runner Up: KE&G Construction Rocky Mountain Chapter

Winner: Roloff Construction Iowa/Nebraska Chapter

Winner: Folience Iowa/Nebraska

TEA’s Professionals’ Forum: Book Your Spot in Charleston Today! After the overwhelmingly positive feedback we received at the 2025s event, we are returning to Charleston, South Carolina in 2026! We are thrilled to welcome you back to The Charleston Place, an iconic hotel in the heart of the city's historic downtown. The Professionals’ Forum will be here before you know it, so book your spot soon! At the Forum, professionals come together for an immersive, peer-driven learning experience. And because the Forum is a meeting of professionals for professionals, you can maximize your participation in the event's programming without the pressure of servicing or attending to client needs at our larger, national events.

Breakout Session Topics Announced! In addition to general sessions on Thursday and Friday, breakout discussions will be offered in three time slots on Thursday afternoon and Friday morning. All nine topics will be repeated to allow professionals to attend up to three different sessions. • Trends in Repurchase Obligation & Sustainability • Solutions for Proposed Long-Term Internal ESOP Loan Lengths • Contributory ESOPs: Moving Forward and any Input from Regulators • New ESOP Formations, Industry Concentrations & Finance Alternatives/Impacts • ESOPs and Mergers & Acquisitions • ESOP Plan Design Innovations • AI and Data Analytics in Valuation, Administration, and Governance • ESOP Terminations: How to Handle it Properly • "The Perpetual ESOP": Strategies for Limiting ESOP Termination Through Acquisition

The chairs of The ESOP Association’s professional advisory committees design the Forum. These leaders rank among the foremost experts in their fields. Join your peers to share insights, explore emerging trends, network, and develop or refine best practices.

Back Again for 2026: ESOP-Talks for Young Professionals Are you interested in building a career as an ESOP Professional? Join us for programming specifically tailored to our younger ESOP professionals (40 and under). The program is structured as a combination of learning and collaboration designed to benefit the ongoing growth of our professional community. You'll learn from experienced ESOP professionals on topics such as addressing the life cycle of an ESOP and transaction issues. This event is designed to help you build those critical relationships while understanding the ESOP career path and opportunities. Additional fee applies.

Venue: The Charleston Place Hotel Located in the vibrant heart of historic downtown Charleston, The Charleston Place is just steps from some of the city’s best independent shops, the City Market, antique stores, museums, historic sites, and art galleries. To make the most of your stay, TEA has secured a special rate at The Charleston Place of $350 per night, plus applicable fees and taxes. Our room block is available until Tuesday, January 13, but please be aware that the hotel may reach capacity earlier. Book your accommodations through our secure portal. REMINDER: This event sells out every year. Book soon and join your peers in Charleston!

December 2025 | 11

ESOP REWARDS By The ESOP Association

ESOP Rewards Providing Employee Owners, ESOP Companies With Big Savings Exclusively for TEA members, ESOP Rewards gives ESOP companies, employee owners, and professionals exclusive discounts from trusted brands on purchases and experiences you use every day, including: • Flights, hotels, and rental cars • Office equipment, shipping, and supplies • Concerts, movies, and live events • Home improvement projects, mobile plans—and more! The best part: ESOP Rewards is included in your TEA membership! It’s part of our commitment to supporting your success at work and enriching your life outside of it. With ESOP Rewards, you’ll save money, enjoy memorable experiences, and strengthen your ESOP culture.

You must be logged in as a member to gain access to benefits.

Just a small sample of benefits available to employee owners:

Here's a small sample of big savings for ESOP companies and professionals:

• Save up to 26% on hotels, flights, and rental cars through Engine. • Enjoy up to 15% discounts at Lowe's.

•5 0% off Domestic Next Day shipping with UPS, plus 30% on Ground, with discounts for International & Freight shipping, too!

• Get up to 60% off concert tickets and sporting events, plus exclusive discounts at movie theaters, theme parks, and shows on Broadway and in Vegas.

•U p to 75% on essentials from Office Depot, and at least 12% off at Staples. • Up to 50% savings on Lenovo products.

• Save up to 12% on T-Mobile plans.

•C intas provides exclusive discounts to TEA members on all work apparel, facility services, first aid and safety and fire protection needs.

• Up to 50% savings on Lenovo products. • Make your next appliance purchase easier, with up to 25% savings with GE.

In fact, by taking advantage of just one or two of these discounts, your membership in The ESOP Association could pay for itself! For questions, please contact Jennifer Edwards, VP of Member Services, at jedwards@esopassociation.org or 202-293-2971.

PRESIDENT'S COLUMN

Transforming ESOP Education: A Vision for 2026 and Beyond By: Jim Bonham, President and CEO, The ESOP Association

Most crucially, from a leadership perspective: how can you know that your investment in professional development is producing real value for the organization? How can you ensure the training aligns with the latest thinking, especially in today’s age of AI, where misinformation can easily spread?

Building a Stronger, More Measurable Learning Experience To address these gaps, we are evolving in four key directions:

1. Certifications with Real Rigor Education has long been the cornerstone of The ESOP Association’s service. In our member surveys and conversations with ESOP leaders, one theme clearly emerges: the opportunity to learn and master the complex landscape of employee ownership is among the top reasons our corporate and professional members join and remain engaged. Over the years, we’ve significantly enhanced how we deliver ESOP education. But now, we are on the cusp of a more transformational shift. Beginning in 2026, The ESOP Association is launching an entirely new certification framework, built around peer-reviewed content, a professionally designed curriculum, and modern researchbased adult learning methodologies.

Why Change Is Overdue

Starting in 2026, we’re launching our ESOP certification programs. These will not be mere badges, but robust credentials. Courses and curriculums will be scaffolded— reaching various levels of expertise or commitment—and directly tied to ESOP disciplines, leveraging peer-reviewed content developed by our team in concert with experts on our advisory committees.

2. Micro-credentials for Real Progression

Our certification program will also feature stackable microcredentials that can be combined towards full certifications if desired. Members may complete modules in sequence, building deeper mastery over time. This structure gives companies and leaders clear visibility into knowledge progression while demonstrating individual competency in ESOP roles. "Over the years, we’ve

For decades, ESOP education has significantly enhanced how we 3. Interactive, Engaging followed a familiar model: in-person conferences, books and articles, deliver ESOP education. But Learning Formats panels of expert practitioners, and now, we are on the cusp of a We're moving away from occasional webinars or roundtables. passive lectures towards active more transformational shift." These all remain at the core of our learning. Through our Employee offerings, and our chapter meetings Owner Accelerator, for instance, and national conferences are participants engage in business simulations and realindustry-leading in both expertise and engagement. life case studies. At conferences, we’re replacing some Yet, we must ask ourselves: how effectively are these traditional sessions with hands-on, three-hour workshops. formats building lasting knowledge? Traditional lectureThis shift mirrors the educational approach we've begun based presentations don’t always offer feedback on rolling out in our Executive Education certification in retention, nor guarantee that content is up-to-date. They partnership with the Darden School of Business at the also do little to assess whether your employee owners are University of Virginia, the #1 public business school in the internalizing key concepts, or whether we’re reinforcing a world. consistent, shared vocabulary across your company.

December 2025 | 13

4. Personalized, Company-Branded Digital Learning Members will soon have access to an online portal filled with curated ESOP educational content. Administrators can build a company-branded hub, selecting modules from our library or adding their own. We envision this portal becoming a home for onboarding, ongoing development, and ESOP immersion.

Executive-Level Programs Already Delivering

Why This Matters These changes are more than incremental. They reflect a fundamental rethinking of how ESOP education should work in today’s world. Rather than relying entirely on traditional formats, we are embracing a more agile, measurable, and scalable approach. • Knowledge that sticks: Our new formats reinforce learning through experience and application. In the classroom, instructors lead active sessions that focus on helping participants retain knowledge. • A common language: Certification ensures that individuals from different ESOP companies share a consistent foundation of knowledge—benefiting culture, governance, and alignment.

Some of this change has already begun. In partnership with UVA’s Darden School of Business, in 2025 we launched a modernized Leading in an Ownership Setting™, an executive education program grounded in the case-study • Demonstrable ROI: Leaders will see real evidence of method of learning pioneered at Darden. The feedback has employee development. Certifications, micro-credentials, been overwhelmingly positive. and onboarding completion Our first cohort of CEOs and create measurable proof that your CFOs have now graduated, and their investments in training employee "These changes are more journey is creating ripple effects: owners are working. than incremental. They reflect some of their lessons, challenges, • Future-proofing: As AI and and case studies are being molded a fundamental rethinking of technology evolve, our content into real-world teaching materials. how ESOP education should will remain rigorous, accurate, and Even more exciting, these ESOPpeer reviewed, protecting against work in today’s world." specific case studies will be misinformation and maximizing introduced to MBA students at value. Darden beginning next spring. We’re not just educating ESOP leaders—we’re helping shape the A Vision for Tomorrow’s ESOP Leaders next generation of business leaders. At its core, this initiative aligns with our mission: to empower employee-owners, executives, and professionals What’s Coming in 2026 with the tools they need to excel. By elevating ESOP Here’s a preview of the education roadmap you can expect education, we are strengthening the entire ecosystem, in the year ahead: from the newest employee-owner to the CEO, from today's • Certification Launch: Our new certification pathways companies to tomorrow’s MBA graduates. will go live in early 2026. Courses will combine online We know this transformation won’t happen overnight. modules, in-person conference-style learning, and be We are laying a foundation right now, and will continue completed with online assessments. building steadily through 2026 and beyond. We are entering a bold new era of ESOP education, where learning is not just • Onboarding for New Employee-Owners: We’re shared, but demonstrated, certified, and sustained. rolling out a suite of onboarding units of study to help Thank you for being part of this journey, and we non-executive team members understand ESOP basics, are looking forward to helping build a smarter, stronger governance, and their role as owners. employee ownership movement for the years ahead. • Lifelong Learning with Darden: Through our partnership, members will gain access to Darden’s Executive Education and Lifelong Learning programs— bringing that world-class MBA rigor into your ESOP world. • AI-Assisted Content Creation: We will be utilizing an AI tool that can help members create avatar-based, companyspecific educational content—trusted, accurate, and tailored to your needs.

The ESOP Association’s Annual

August 23-25, 2026 Terranea Resort | Rancho Palos Verdes, CA

A Must-Attend Event for ESOP CEOs A unique opportunity for ESOP leaders to gain valuable insights alongside fellow CEOs who are tackling similar challenges. With expert-led roundtable discussions and carefully selected keynote speakers, the Summit is geared toward providing CEOs with actionable strategies to address the most pressing economic, business, and ESOP-specific challenges.

Registration Open

esopassociation.org/ceo-summit-2026

The ESOP Association’s Annual

June 28-30, 2026 Fairmont Sonoma Mission Inn | Sonoma, CA

A Groundbreaking Experience for ESOP CFOs Join this dynamic program that is carefully curated to maximize value for ESOP finance leaders. Keynotes led by renowned experts in business and finance address emerging macro issues, while panel discussions and interactive sessions dive deep into key topics like strategic financial management, innovation, risk mitigation, and regulatory changes.

Registration Open

esopassociation.org/cfo-summit-2026

LEADING IN AN OWNERSHIP SETTING TM

EMPLOYEE OWNERSHIP FOUNDATION IN PARTNERSHIP WITH THE UNIVERSITY OF VIRGINIA DARDEN EXECUTIVE EDUCATION AND LIFELONG LEARNING

LEARN MORE ABOUT THIS PROGRAM SCANNING THE QR CODE OR VISITING:

ESOPLeadership.org

ESOP LEADERSHIP IS DIFFERENT Executives who run ESOP companies face unique and complex challenges in comparison to running a regular business. It takes special training and understanding of the different requirements, scenarios, and demands of leading in this setting. Leading in an Ownership Setting™ is the only Executive Education program in the nation, run by faculty of one of the top business schools in the world and specifically designed to help the top leaders of ESOP companies learn about the details and unique aspects of leading an employee-owned company.

BOTH CEOS AND CFOS In addition to cohorts for CEOs, we now offer a CFO-specific curriculum for senior ESOP financial leaders. Enhance your skills and build your ESOP CFO peer group, join the waitlist to receive notice of registration opening in advance of the general public. In addition, the Foundation now has flexibility to add other ESOP executives, like CHROs, in future classes. 16

• Expanded curriculum, including M&A, Finance, Repurchase Obligations, Marketing, and Management • A world-class CEO and CFO program, designed for ESOP leaders at the #1 public business school in the world • Strengthen leadership effectiveness • Grow your network of ESOP leaders • Share resources and best practices • Enhance the success of ESOPs across the country

WORLD RENOWNED LEARNING In partnership with the world-renowned Darden Executive Education and Lifelong Learning at the University of Virginia, you will spend two weeks on a deep dive into all of the most important topics you need as an ESOP CEO or as an ESOP CFO to do your job well. In addition to sessions taught by leading ESOP-specific experts, courses will be taught by Darden faculty who represent some of the brightest and most innovative minds in business today. The program will continue to provide exceptional leadership and culture training; however it will now also include an expanded curriculum that provides attendees with more substance in areas like M&A, Finance, Repurchase Obligations, Marketing, and Management that is essential for today’s ESOP Executive.

ABOUT THE DARDEN SCHOOL OF BUSINESS The Darden School of Business at the University of Virginia is one of the premier business schools in the U.S. Darden was recently named the #5 full-time MBA program and #1 public university program by Bloomberg Businessweek, and the #1 public business school in the world by the Financial Times. Darden routinely receives top rankings in Management, Finance, Consulting, and other aspects of its curriculum. Darden’s top-ranked faculty, renowned for teaching excellence, inspires and shapes modern business leadership worldwide through research, thought leadership, and business publishing. Importantly, Darden incorporates the case study method to learning, which works very well in studying the ESOP model and provides a richer educational experience than a lecture-based curriculum.

December 2025 | 17

Expanding the Celebration of Employee Ownership Month ESOPATHON 2025 marked a major milestone as the fifth year of celebrating Employee Ownership Month through this signature, community-driven fundraising campaign. The anniversary theme focused on expansion—expanding awareness, participation, and integrating ESOPATHON organically into activities that already make Employee Ownership Month meaningful for member companies. The campaign emphasized augmentation rather than replacement of existing traditions. Companies and chapters received encouragement to incorporate ESOPATHON into their established celebrations, enabling broader adoption without adding extra workload. Communications delivered a clear message: ESOPATHON fits seamlessly into any event—from long-standing employee engagement programs to chapter-level gatherings—serving as a unifying way to celebrate shared ownership while supporting the community. This strategy, combined with an expanded awareness campaign and the highly successful Postcard Challenge, drove record-breaking participation. ESOPATHON 2025 attracted 176 participants, a 58.5% increase over 2024’s 111. Team participation more than doubled, rising from 31 teams in 2024 to 62 teams in 2025—a 100% increase. These results reflect the strongest engagement levels to date and confirm that amplifying existing celebrations resonates deeply across the ESOP community.

62 Participating Teams

176 Donors

ESOPATHON raised $543,619 for the Foundation in 2025, our second-highest fundraising total ever! This breadth of participation and donor diversification demonstrates ESOPATHON’s growing roots within the association. At the chapter level, New England led with $105,963.20, followed by Mid-Atlantic & Carolinas at $51,671.30, and Ohio & Kentucky at $44,327.41. California/Nevada contributed $43,695.70, and Iowa & Nebraska added $27,130.66, rounding out the top five.

All 19 Chapters

Top-performing companies showed exceptional commitment. Carris Reels led with $37,433, followed by Blue Ridge Associates at $31,090, CTL Engineering at $24,288, Recology at $16,421, and Freedom Industries at $11,372. Individual fundraisers also delivered outstanding results. David Fitz-Gerald topped the leaderboard with $37,432.80, followed by Ali Jamshidi at $24,288, Janet Edmunson at $19,750, Derrick Vick at $11,117, and Peter Ney at $7,218.30. ESOPATHON 2025 demonstrated that shared ownership thrives when built on existing connections. By expanding rather than replacing traditions, the ESOP community achieved its most engaged Employee Ownership Month yet—setting the stage for even greater momentum in the years ahead. 18

Contributing more than $543,600!

Invitation to Participate: 2025 National ESOP Employee Survey The ESOP Association and the Rutgers Institute for the Study of Employee Ownership and Profit Sharing encourage your company to participate in the 2025 ESOP Employee Survey, a major new research initiative to identify the critical success factors that help ESOPs deliver value to both companies and employees. Participating companies will distribute a short (15–20 minute) anonymous online survey to their employees. In addition, the CEO or another company executive familiar with the ESOP will participate in an interview with researchers, the interview will take between 30-60 minutes. In return, companies will receive a customized report comparing their results to those of peer ESOPs and national benchmarks. Participating companies will also have the option to include tailored questions in their survey. Your company’s insights will contribute to cutting-edge research on ESOPs that aims to strengthen the field. If you are potentially interested, please fill out the information in the form to register your company. Questions? Contact: AJ Clomax ac2082@smlr.rutgers.edu and Douglas Kruse dkruse@smlr.rutgers.edu.

Scan the QR Code below or visit esopassociation.org/2025-esop-survey

December 2025 | 19

ADVOCACY

Private Equity's Plans - An Existential Danger to ESOPs The high profile attempt of private equity firms to redefine ESOPs has caused substantial debate in the ESOP community, and for good reason. In November, for the first time, The ESOP Association produced a special edition of the ESOP Report with an in-depth examination of the proposal to redefine ESOPs, along with the concerns and dangers. This piece is one of many from that special edition, which also includes the views of TEA’s Board of Directors, TEA’s President/CEO, as well as ESOP corporate leadership, academics, and ESOP finance professionals. The special edition can be found on TEA’s website at esopassociation.org.

People and organizations nationwide and policymakers 1. Redefines ESOPs from both political parties admire ESOPs for their distinct The Expanding ESOPs plan (STEPs) proposes a new, identity and positive impact. They are built on longevity, special, protected qualified retirement plan labelled an transparency, and ownership. While an ESOP company can ESOP. But this new plan carries none of the hallmarks of certainly go out of business or transition to a traditional ESOPs – ownership, transparency, longevity, or protections ownership structure, the ultimate goal of an ESOP company for workers. It is inferior for workers is for employees to carry on the and mostly benefits investors. culture, success, and legacy of In fact, any plan to provide Calling an apple an orange doesn’t the business in its community. As costly private equity tax breaks make it so. the company’s stock price grows and the number of employees and exemption from core 2. Crowds out ESOPs increases, the benefits of the ESOP ERISA worker protections is an Business owners face the choice grow along with it, rewarding the of selling to their employees and existential danger to ESOPs, workers and promoting retirement inviting DOL oversight, or selling savings. Congress has consistently and one TEA must oppose. to private equity, possibly for a supported ESOPs because of these premium, without government societal benefits. Therefore, no one involvement. If Congress grants private equity huge tax should be allowed to co-opt ESOPs with a new plan that incentives and “safe harbor” immunity from regulations offers neither permanence nor long-term benefits nor actual designed to protect employees, why would any future ownership. business owner sell to an ESOP? Every PE firm would use To emphasize TEA’s stance on the efforts by private this generously subsidized and legally protected model. equity (PE) firms to promote their equity-sharing programs: Over time, this model would subsume the ESOP market, the Association does not oppose private equity firms ironically, in the name of “ESOPs.” granting or sharing equity with their employees. Their ongoing effort to share the upside of a transaction with 3. PE Failures Jeopardize ESOPs their employees is laudable. However, this proposed new Not all private equity investments end with successful, structure is absolutely not an ESOP and should not be profitable businesses anchored in their communities. A labelled as such. In fact, any plan to provide costly private large percentage of PE-backed companies cut jobs or equity tax breaks and exemption from core ERISA worker even declare bankruptcy. The ESOP community should protections is an existential danger to ESOPs, and one TEA not allow Congress and the public to conflate the failures, must oppose. layoffs, and closures of a separate and distinct model with Why? There are several reasons. ESOPs, which successfully protect workers and keep jobs in communities. 20

4. ESOPs Blamed When PE Promises Don’t Pan Out

7. Expanding ESOPs Jeopardizes Other ESOP Issues

Expanding ESOPs is selling a model to Congress and workers as an “ESOP” with “ownership.” Neither term is accurate. An ESOP’s promises are contractual, real, and irrevocable – not so for STEPs. When workers get laid off or depart, when profits don’t hit their target, or when the numbers just don’t pencil out, workers will be shortchanged and likely resentful. The current positive reputation of ESOPs and pride in being an owner will evaporate.

ESOPs have seen extraordinary public policy gains over the past year. The ESOP community is on the precipice of landmark changes designed to spark growth for ESOPs. Key personnel in the President's Cabinet and sub-Cabinet positions are clear supporters of ESOPs, and they reached those positions with bipartisan support. The tax and regulatory proposal by Expanding ESOPs jeopardizes those gains, whether it passes or not. When legislators see a divided community supporting multiple proposals, they typically respond by doing nothing. A unified community with a unified voice is the most effective strategy. This debate, which could last several years, jeopardizes:

5. Current ESOP Tax Treatment Joined to Private Equity Allowing the new STEP proposal to be called ESOPs joins the two of them together for future tax policy debates. It’s understandable why PE wants to connect to ESOPs, but should the ESOP community connect its future to PE? If current ESOP tax provisions are lumped in with those of Expanding ESOPs, then Congress will “score” them together, making ESOPs very “expensive” in the eyes of policymakers. There’s a saying that, “Pigs get fat, while hogs get slaughtered.” Expanding ESOPs proposals will place a distinct target on ESOPs’ backs in future tax legislation. ESOPs face little danger from Congress in this regard today, so inviting controversy is a mistake.

6. Jeopardizes the Bipartisan Political Support for ESOPs For decades, ESOPs have built bipartisan support, cherished by the ESOP community, and which has been positive for employee ownership. Yet PE has been a lightning rod for several reasons. ESOP Champions on both sides of the political aisle will shift positions when private equity deals are rebranded as “ESOPs”.

Here’s the inescapable conclusion about Expanding ESOPs plans: They don’t create, protect, or benefit employee owners like ESOPs. They lack decades of independent research proving their multiple benefits like ESOPs.

• The American Ownership Resiliency Act (AORA), which incentivizes private capital to finance ESOPs, will become more difficult to pass. • The Employee Ownership Fairness Act, addressing section 404 and 415 limits for employee owners, could be viewed as too costly when combined with PE tax breaks. • Litigation reform, critical to growing ESOPs, would be complicated by the pursuit of narrow “safe harbors” for a preferred investor class called “ESOPs.” Expanding ESOPs' public support is largely based on a high-priced public relations campaign, coupled with a stealth lobbying campaign, all resting on just 120 words of carefully crafted principles. The ESOP Association’s members have generated real momentum for removing the existing regulatory roadblocks to ESOP formation, including bipartisan and bicameral support for legislation to bring private capital to the table to support ESOP growth. This is what support for creating more ESOPs should look like. ESOPs have always been about properly balancing capitalism with values, as evidenced through the widespread treatment of employee owners. Removing the “values” side of this equation leaves it unbalanced. No one should be able to buy or force a redefinition of what makes ESOPs special.

Simply put, STEPs should not be called or call themselves ESOPs. Therefore – They should not trade on research or decades of bipartisan goodwill built up by ESOPs.

They are not retirement plans like ESOPs.

They should not receive massive taxpayer incentives in the name of ESOPs.

They are not a finance mechanism, as Kelso and Senator Long designed, like ESOPs.

And they should not pursue special legal immunity (aka a “safe harbor”) as ESOPs.

They do not preserve a founder’s legacy or provide long-term succession, like ESOPs.

STEPs are not ESOPs. December 2025 | 21

Cash For College! A scholarship for employee owners or their dependents

Appl icatio n Now Open !

Employee Ownership Foundation – Trustee Scholars cholarship Application Period: December 1, 2025 S – February 13, 2026 cholarships are $5,000 per year for undergraduate study or S vocational-technical school training only wo scholarships are awarded annually and are renewable for up T to three years (four years max). That’s up to $20,000 for a fouryear degree!

Application Open:

December 1, 2025 - February 13, 2026 An initiative of the Employee Ownership Foundation, a 501(c)3 non-profit organization founded in 1991 and dedicated to promoting and expanding employee ownership through research, grants, events, and public awareness. For more information, please go to employeeownershipfoundation.org

cholarship winners will be notified in April 2026 and funds will be S provided for the beginning of the fall 2026 school year

Eligibility Applicants must be an employee or dependent of an employee mployee must be employed by a corporate E member company of The ESOP Association in good standing Applicants must be 22 years old or younger urrently enrolled or planning on enrolling in C undergraduate study at an accredited two- or four-year college, university, or vocationaltechnical school Learn more: EmployeeOwnershipFoundation.org/trustee-scholars

Eligibility

Applicants to the Employee Ownership Foundation Trustee Scholars Program must:

e age 22 and under, on the application deadline, B February 13, 2026. An employee or dependent of an employee of a corporate member company of The ESOP Association (TEA). • Employee is defined as any part-time of full-time employee at a corporate member company, regardless of their vesting status in the company’s ESOP plan. • Dependents are defined as natural and legally adopted children or stepchildren living in the employee’s household or primarily supported by the employee. Companies must be a corporate member in good standing of The ESOP Association prior to the application deadline date. • Good standing is defined as being an active, dues paying corporate member. Be a high school senior or high school graduate, current undergraduate student, or enrolled in a vocational/technical school. Plan to enroll in full-time undergraduate study at an accredited two- or four-year college, university, or vocational-technical school for the entire upcoming academic year. • Full-time is a student who is enrolled for the number of hours or courses that the school or institution considers to be filltime attendance. • An undergraduate student is defined as seeking one of two higher education degrees—an associate degree or a bachelor’s degree. • Accredited. • Two-year colleges are also known as community colleges and can also be part of a transfer program to a four-year institution. • Four-year college is defined as a college, university, or specialized institution. • A vocational -technical school is a term for either trade or technical schools. • The institution must be accredited by a “nationally recognized accrediting agency”. The U.S. Department of Education recognized accrediting agencies. • Certification programs must be through an accredited institution and must run on a standard academic semester calendar. Certification programs must be a minimum of one semester/term in length and applicants must be enrolled at the time awards are disbursed in August.

Requirements

As part of your application, you must upload the following:

Transcript: A current, complete transcript of grades. • Transcripts must display the student’s name, school name, grades and credit hours for each course and term in which each course was taken. • Grade reports (also known as report cards) are not accepted. • If you are uploading a high school transcript and providing SAT or ACT test scores, if those scores are not listed on your high school transcript, you will need to upload a copy of your test score report(s) separately. • If you are uploading a college transcript, SAT and ACT test scores are not required. IRS Form 1040: Copy of the first two pages of the most recently filed IRS Form 1040 used for the Financial Information section of the application.

• Please black out all social security numbers and bank account information. Video Essay: Submit a two-minute video answering the following question: “What does employee ownership mean to you, your loved ones, and/or your community?” • The video should be recorded by the beneficiary of the scholarship, from their perspective as an employee at an ESOP company or as a dependent of an employee at an ESOP company. • Only the finalist committee will review videos – they will not be shared publicly without explicit permission from the video creator. • Have fun!

Awards

p to two (2) scholarships will be awarded to separate individuals. U If selected as a recipient, the student will receive a $5,000 per year award. Awards are renewable up to three years (4 years total) or until a bachelor’s degree is earned, whichever occurs first, on the basis of satisfactory academic performance, maintaining a cumulative grade point average of 2.5 on a 4.0 scale, and fulltime enrollment. Awards are for undergraduate study at accredited institutions only, including: • Two-year/community colleges, including those that transfer into a four-year college. • Four-year colleges, a university, college, or specialized institution. • A vocational -technical school Awards are NOT for: • Graduate students seeking advanced education such as Masters or PhD programs • Unaccredited training schools or colleges Application Period Applications can be submitted via the online portal on the Scholarship America website December 1, 2025 – February 13, 2026 The application deadline is 11:59 PM Eastern Standard Time, Friday, February 13, 2026 Notification All applicants will be notified in April, prior to College Decision Day (May 1) Payment of Scholarships Scholarship America processes scholarship payments on behalf of the Employee Ownership Foundation. Payment will be made directly to the school in early August. Selection of Recipients Scholarship recipients are selected on the basis of: Academic record Demonstrated leadership and participation in school and community activities Work experience A statement of educational and career goals and objectives Unusual personal or family circumstances Financial need considered, but not determinative Selection of finalists is made by Scholarship America. The Employee Ownership Foundation finalist committee will select scholarship recipients. Not all applicants to the program will be selected as recipients. Students may reapply to the program each year they meet eligibility requirements. All applicants agree to accept the decision as final.

Applications must be submitted at: EmployeeOwnershipFoundation.org/trustee-scholars EOFscholars@scholarshipamerica.org December 2025 | 23

Welcome Krista Candela to The ESOP Association’s Team! Krista Candela Director, Executive Operations Krista brings eight years of experience supporting executives as both Executive Assistant and Chief of Staff and is known for bringing structure to vision and humanity to operations. After spending 15 years raising humans full-time, she entered the workforce and quickly became the calm in the storm, building systems that make things work and cultures that make people stay. From startup chaos to mission-driven growth, Krista has led operations, strategy, and culture with both heart and precision. She thrives in the messy middle streamlining what’s broken, organizing what’s scattered, and ensuring people feel seen through it all. In addition to her role with The ESOP Association, Krista is the founder of Elevate & Empower, a reimagined community for job seekers and career rebuilders rooted in purpose, skill-building, and belonging. She is also pursuing a business degree with a concentration in Industrial and Organizational Psychology, deepening her understanding of how people, systems, and strategy work together to create thriving organizations. When she’s not solving businesses’ toughest challenges, you can find Krista meditating in nature, traveling to new places, or lifting a really heavy barbell. She lives in the Maryland suburbs of DC with her daughters and her adorable cat, Olive.

What is ESOP PAC? ESOP PAC is the voluntary, non-partisan Political Action Committee (PAC) of the ESOP Association. ESOP PAC is the oldest political entity specifically charged with supporting pro-employee ownership elected officials. Formed in 1988, ESOP PAC allows our members and the larger employee ownership community to pool small personal contributions from thousands of donors into larger donations. These donations help elect and re-elect federal candidates to Congress who promote the employee ownership agenda.

For more information, please contact: Greg Facchiano at gfacchiano@esopassociation.org

LEARN MORE

E M P LOY E E O W N E R S H I P F O U N DAT I O N

Accelerating Ownership: A Year of Growth and Impact in 2025 2025 has been a big year for the Accelerator series. We more than doubled the number of classes held, welcomed our 500th attendee, and set the stage for continued expansion in 2026. So what does this all mean for the ESOP Employee Accelerator program going forward? Growth – The Accelerator grew from 6 events in 2024 to 13 in 2025, all between June and December. And thank you to the 13 generous member companies who opened their doors and hosted Accelerator classes, inspiring attendees with their impressive ownership cultures and helping us to keep events as affordable and accessible for attendees as possible. A Larger Team – This year, three more trainers began to teach and support the Accelerator course. This adds to our capacity to build our schedule and reach members in every chapter throughout the country. Scale – Building our outreach, event structure and support, coordination and scheduling—everything we need to grow the program and bring it to more members. We also continue improving the program by implementing ideas and feedback given by attendees to optimize all aspects of the course, from lesson planning and materials to logistics to outreach.

What's Coming Next Year? First and foremost, look for more events! Everything we have done this year sets the stage for us to expand in 2026, reaching more employee owners, and helping more companies develop stronger ownership cultures. Expect additional case studies featuring our attendees and hosts, whose stories impress and inspire. Our community has an abundance of employee owners and groups that give back to those around them. It’s a pleasure to tell their stories and share the ways in which employee ownership is making a difference firsthand in people's lives. You’ll notice more content on our websites, emails, and LinkedIn pages highlighting the benefits of ownership culture, like how it drives company performance, employee owners’ work experience, and their retirement account balances. The Employee Ownership Foundation’s fascinating research gives us a strong basis for understanding the

value of ESOPs and ownership culture and the lifechanging potential it has for workers, households, and companies in the United States. The Accelerator program is poised to take another great leap in 2026, and we look forward to working with you, our valued members, to take that exciting leap together! If you would like to see an Accelerator class in a city or town near you, email Aaron Moberger at amoberger@ esopassociation.org

What Employee Owners Are Saying About the Accelerator Program "With very limited prior ESOP knowledge, this Accelerator gave me a breadth of information and answered a lot of the questions I had going into it. I would highly recommend for anyone new to an organization that's an ESOP or an aspiring leader that is striving to improve and positively impact the company culture of an ESOP." — Adam Carlsen, Controller at Steel-Pro Inc. "The Accelerator was an engaging and illuminating workshop. The focused look at certain business fundamentals strengthened the foundation for my ESOP knowledge!" — Ben Guan-Kennedy, Video Content Producer at Imtra "The Accelerator program provided a strong baseline understanding of the ESOP structure as well as real world examples we can apply to our own business." — Kim Davis, VP Commercial at Performance Validation

December 2025 | 25

CHAPTERS

TEA Chapter & Regional Events

N IN T HE M

NE T HE

IO THE

TI O P A SS O CIA

Castle Hill Inn Newport, RI

CAROL I

Spring Conference March 30-31, 2026

OP ASSO

Hotel Madison & Shenandoah Valley Conference Center Harrisonburg, VA

Hilton Raleigh North Hills Raleigh, NC

O TI CIA

NEW YORK/ NEW JERSEY

New York & New Jersey

Events Coming Soon!

IC &

N EW J E R S E Y

T AN

ER OF

TI O P A SS O CIA

East Lansing Marriott at University Place East Lansing, MI

Fall Conference September 15-16, 2026

Double Tree Hotel & Conference Center Chicago Downers Grove, IL

TI O P A SS O CIA

CEO Conference April 9-10, 2026

Maryland, North Carolina, South Carolina, Virginia, Washington, DC, & West Virginia

Spring Conference March 11-12, 2026

Spring Conference March 17, 2026

T ER OF

Virtual

G L AND C H

Sheraton Nashua Nashua, NH

Spring Conference March 17, 2026

AN CHA

Illinois

ILLINOIS

I LL

NO I S CHAP

Board of Directors/Trustee Conference March 10-11, 2026

Sheraton Nashua Nashua, NH

MID-ATLANTIC & CAROLINAS

The Fontaine Hotel Kansas City, MO

IG I CH

Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, & Vermont

TI O P A SS O CIA

TH E NE

OP ASSO

O TI CIA

THE MID-A TL

THE

R OF

Kansas & Missouri

Spring Conference March 4-5, 2026

THE C AL I E

TI O P A SS O CIA

AM E R I C A

Michigan

OP ASSO

TI CIA

NEW ENGLAND

Virtual Roundtable January 21, 2026

HEART OF AMERICA

MICHIGAN

C WAII HAPTE HA R

EBRA S KA CH

Iowa & Nebraska

Events Coming Soon!

N A/

The Hotel at Kirkwood Center Cedar Rapids, IA

Hawaii

OP ASSO

Events Coming Soon!

Winter Conference February 25-26, 2026

O TI CIA

A/DAKOTAS OT CH R OF

Hotel Alba Tampa, FL

HAWAII

Minnesota, North Dakota, & South Dakota

MINNESOTA/ DAKOTAS

TI O P A SS O CIA

IDA CHAP

Winter Conference February 11-12, 2026

Florida

Indiana

IOWA/ NEBRASKA OF

FLORIDA

502 East Event Centre Carmel, IN

Hyatt Regency Sacramento Sacramento, CA OR FL

TI O P A SS O CIA

NA C HAP

Annual Conference September 16-18, 2026

D IA

Spring Conference March 10, 2026

California & Nevada H

INDIANA

IA/NEVADA C RN H FO

R OF TE AP

CALIFORNIA/ NEVADA

TI O P A SS O CIA

EN T

UC KY C

T HE

TI O P A SS O CIA

UNTAIN C

E H

Monona Terrace Convention Center Madison, WI

Londonderry January 30, 2026 Admix Londonderry, NH

TI O P A SS O CIA

Spring Conference March 4, 2026

Web Industries Suwanee, GA

Rocky Mount February 17, 2026 Freedom Industries Rocky Mount, NC

Orange County June 12, 2026 HdL Companies Brea, CA

Honolulu June 16, 2026

Bowers + Kubota Waipahu, HI

THE

TI O P A SS O CIA

MIDWEST REGIONAL CONFERENCE

H E A S T C H AP

Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota, & Wisconsin ER

Events Coming Soon!

ON S I N C HAP

Advocacy Day March 3, 2026

Virtual Roundtable January 21, 2026

ISC

Virtual

Wisconsin

TER OF

OP ASSO

O TI CIA

Hilton Tucson East Tuscon, AZ

Alabama, Arkansas, Georgia, Louisiana, Mississippi, & Tennessee

Atlanta January 21, 2026

Cisco-Eagle Coppell, TX

THE P ENN

Spring Conference April 1-2, 2026

SOUTHEAST

ESOP EMPLOYEE ACCELERATOR

Sheraton Valley Forge King of Prussia King of Prussia, PA

Arizona, Colorado, New Mexico, Utah, & Wyoming

Sheraton Indianapolis Hotel At Keystone Crossing Indianapolis, IN

Fall Conference September 30-October 1, 2026

Spring Conference March 23-24, 2026

ROCKY MOUNTAIN

September 29 - October 1, 2026

Let’s Talk ESOPs - Dallas August 4, 2026

WISCONSIN

GREAT LAKES REGIONAL CONFERENCE

Indiana, Kentucky, Michigan, & Ohio

IA/DELAWAR

Austin Marriott South Austin, TX

AN LV

TI O P A SS O CIA

Austin Marriott South Austin, TX

Spring Conference March 25-26, 2026

R O

BVA Group Plano, TX

Pennsylvania & Delaware

E TH

Let’s Talk ESOPs - HR Edition February 18, 2026

Renaissance Columbus Westerville - Polaris Hotel Westerville, OH

PENNSYLVANIA/ DELAWARE

K L A H O MA C

Seattle Gymnastics Academy Seattle, WA

Spring Conference and Advocacy Day March 3-4, 2026

TI O P A SS O CIA

Let’s Talk ESOPs - Washington June 22, 2026

Ohio & Kentucky

The Riverside Hotel Boise, ID

OHIO/KENTUCKY

TEXAS/ OKLAHOMA

THE

WE S T C HA

Texas & Oklahoma H

Spring Conference March 12-13, 2026

Alaska, Idaho, Montana, Oregon, & Washington

NORTHWEST

TI O P A SS O CIA

September 22-24, 2026 Iowa Events Center Des Moines, IA

Watch TEA’s Chapter Event Site, esopassociation.org/events/ chapters, for more info.

We hope to see you there! December 2025 | 27

P R O F E S S I O N A L D E V E LO P M E N T

Rethinking Your ESOP’s Provisions By: Pete Shuler, Blue Ridge Associates

**Note: This is part one of a two-part series. Part two will be published in next month’s ESOP Report. The plan design features that govern the most important aspects of an ESOP — from entry and allocation eligibility to vesting, distributions, and diversification — are decided upon during the busyness of the initial ESOP transaction, yet require careful consideration. While these discussions are often more thoughtful and comprehensive now than they were in the past, they still may not always yield the ideal results. The seller and the company’s management team may not fully realize the long-term impact of important plan design decisions, with a focus on the initial ESOP transaction being a high priority. Whether a company’s ESOP transaction happened recently or many years ago, the organization should review and, if necessary, reconsider the rules that govern the plan to ensure they are contributing to your current goals. There are important questions that decision-makers can ask to assess the current state of the ESOP, including:

participants. A company’s ESOP legal counsel and third-party administrator can help to navigate these significant matters.

Entry/Participation

The longest waiting period allowed by law to join an ESOP is composed of (1) a 12-month period during which the employee must work 1,000 hours, (2) attaining age 21, • Do some of the plan provisions contradict the message and (3) entering on January 1 or July 1 (assuming the plan the company is attempting to communicate with its has a December 31 year-end) following completion of the employees? 12-month period and attaining age 21. (There is a two-year entry wait that is possible under the law. However, since • How can the organization better align plan design with this longer wait must be paired with immediate 100% company culture? vesting, it is almost never used by ESOP companies.) • It’s important to keep all company goals in mind when For many years, there was a knee-jerk reaction to use evaluating changes to an ESOP the longest waiting period (oneand the implications of those year wait/age 21/semiannual entry changes. For instance, if a change Whether a company’s ESOP dates) and, because of this, it is still meets a cultural goal but incurs the most prevalent entry provision transaction happened recently a significantly greater cost, that among ESOPs. Although many or many years ago, the change may not be feasible, or reasons are given for using the onea more viable alternative may organization should review year waiting period, in many cases exist. Similarly, companies must and, if necessary, reconsider there is no solid justification for carefully consider changes that using that rule. the rules that govern the plan... could lead to increased work for The biggest reason for not using the human resources department the one-year wait and semiannual or other groups. entry dates is that it results in an extended wait time for When considering changes to a qualified retirement participants. For example, if a person is hired on July 15, plan such as an ESOP, regulatory requirements must be 2024, their waiting period ends on July 14, 2025. Assuming considered. Some changes are easy and can be made at they worked at least 1,000 hours during that period and are any time. Others can only be made prospectively — that is, at least 21 years old, they would enter the ESOP on January for the next plan year. Still others should be changed only 1, 2026. The participant statements for the 2026 plan year with extra care to avoid unintentional consequences and to would be finalized around spring/summer 2027, close to ensure accrued benefits are not taken away from existing • Does the ESOP design mesh with the organization’s culture or the one it’s trying to create?

Another concern that some companies have is that three full years after the person is hired. employees who leave the organization within the first year This can present communication and cultural or two of their employment will receive benefits in the problems, especially if the company is growing quickly and/ ESOP. Fortunately, annual allocation requirements and or attempting to use the ESOP as a recruiting tool. If the vesting often prevent this from happening. Most ESOPs company is growing quickly, there will be a large group of require that employees be employed on the last day of employees who hear great things about the ESOP but need the year and work 1,000 hours during that plan year to to wait a significant amount of time before earning a stake receive an allocation for that year. These requirements are in it. There is a risk of employees becoming frustrated by often waived if the person leaves due to death, disability, an extended waiting period for a statement, after being or retirement. Letting a person attracted to the company for its enter the ESOP sooner does ESOP benefits. not necessarily mean they will There are other options There is a risk of employees receive an allocation. when it comes to entry becoming frustrated by an Even if they do receive provisions beyond the one-year extended waiting period for a an allocation, employees must wait/age 21/semiannual entry statement, after being attracted to vest in that allocation before it dates. Many companies like is “theirs.” Most ESOPs use a keeping the one-year wait but the company for its ESOP benefits. six-year graded vesting schedule. having the person enter the This means that employees ESOP in the year they complete are 0% vested until they have two years of vesting service the 12 months. This reduces the wait for statements from (generally plan years in which they work at least 1,000 three years to two years for the person described above. hours). They are 20% vested when they have earned two There are many other possibilities: years of service, 40% with three years, 60% with four, 80% • Enter immediately on date of hire with five, and 100% when they have earned six years of service. Even if a short-term employee enters the ESOP and • Enter the first of the month or quarter after hire receives an allocation, they are 0% vested until they have at • Enter when XX days or months are completed or on the least two years of service. first day of the month or quarter after XX days or months With easier entry, a small percentage of short-term are completed employees may earn a small, partially vested balance that • Enter as soon as 1,000 hours are completed they would not have received with longer entry periods. It may benefit the organization to allow employees, who may The only limit is that the waiting period cannot be become long term, into the ESOP faster and decrease the greater than 12 months within which 1,000 hours are potential frustration caused by long waiting periods. worked. The age provision can be reduced to anything below 21 or removed entirely. Anyone old enough to work can participate in the ESOP.

YOUR AD HERE Advertise your company in the ESOP Report. A publication that reaches more than 15,000 employee owners every month. Learn more at: esopassociation.org/esop-report-ad

December 2025 | 29

P R O F E S S I O N A L D E V E LO P M E N T

Leasing Depreciable Property to an ESOPOwned S Corporation? You Probably Recognized Too Much Depreciation… By: Ted Margarit, Managing Partner, and Nate Dykes, Vice President, Paralign Capital Partners

Over the past 10+ years it has become common practice amongst ESOP practitioners that ESOP-owned S corporations lease, rather than acquire, property, plant, and equipment (“PP&E”) assets. This is particularly true for 100% ESOP-owned S corporations, whom are effectively federally income tax exempt and thus minimize the value realized from depreciation deductions. An increasing number of transactions are structured where PP&E property is held by the ESOP-owned S corporation through the ESOP transaction, only to be sold in a sale leaseback on a post-closing basis in order to unlock liquidity for sellers and avoid income in the form of depreciation recapture from being recognized by the sellers. However, unless properly structured, the lessors in such cases – including former owners who continue to lease PP&E assets to the now ESOP-owned enterprise – may not be entitled to the same accelerated bonus depreciation treatment to which they have grown accustomed.

over 39 years. However, most property owners conduct cost segregation studies to segregate the various sub-elements (plumbing fixtures, carpeting, etc.) of their property into its constituent parts. This allows the property owner to The General Rule of Tax Depreciation depreciate those sub-elements over more favorable 5-15 year periods. Section 168 of the Internal Revenue Code (“IRC”) In summary, with the exception of property with useful governs the allocation of accelerated cost recovery – lives exceeding 15 years, residential commonly known as accelerated and nonresidential real property, and depreciation – for taxpayers that own ...most tangible property other specific exclusions, under the tangible property in determining their General Rule, most tangible property is eligible for depreciation taxable income. Unless accelerated is eligible for depreciation under through IRC § 168(k), Special under accelerated schedules accelerated schedules more favorable Allowance for Certain Property more favorable than than straight line depreciation (and (commonly referred to as the “Bonus straight line depreciation... particularly so for assets eligible for Depreciation”), IRC § 168(a) provides Bonus Depreciation). that the depreciation deduction available under IRC § 167(a) shall be Tax Depreciation for Assets Leased to determined using: (1) the applicable depreciation method, ESOP-Owned Companies under IRC § 168(g) (2) the applicable recovery period, and (3) the applicable convention. This generally results in (A) the 200 percent In an effort to avoid having tax-exempt entities “double declining balance method, until (B) switching to the dip” in relation to both being tax exempt and allocating straight-line method for the first taxable year in which bonus depreciation deductions on assets they use pursuant doing so yields a larger allowance, except for certain assets to a lease but are owned by others to such lessors, IRC with useful lives exceeding 15 years and residential or § 168(g) requires any “tax-exempt use property” to be nonresidential real property (collectively the “General Rule” depreciated under the Alternative Depreciation System under IRC § 168(a)). Under the General Rule, nonresidential (“ADS”) in contrast to the General Rule, and such taxreal property is to be depreciated on a straight-line basis exempt use property is not eligible for Bonus Depreciation. 30

Under IRC § 168(h)(1)(A), “tax-exempt use property” is defined as “that portion of any tangible property (other than nonresidential real property [the requirements of which are explored further below]) leased to a tax-exempt entity.” Under IRC § 168(h)(2), a “tax-exempt entity” means “an organization (other than a cooperative described in section 521) which is exempt from tax imposed by this chapter,” which includes an ESOP. Even though the ESOP is not the direct lessee of tax-exempt use property, these limitations apply to the pass-through entity held by the ESOP. IRC § 168(h)(5)(A) states “In the case of any property which is leased to a partnership, the determination of whether any portion of such property is tax-exempt use property shall be made by treating each tax-exempt entity partner’s proportionate share (determined under paragraph (6)(C)) of such property as being leased to such partner.” IRC § 168(h)(5)(B) further expands upon this, stating “Rules similar to the rules of subparagraph (A) shall also apply in the case of any passthru entity [emphasis added] other than a partnership and in the case of tiered partnerships and other entities.” Further under IRC § 168(h)(1)(B), “nonresidential real property” is included as tax-exempt use property if, among other characteristics, it is subject to a lease to a tax-exempt entity that: • Contains a fixed or determinable purchase option in favor of the tax-exempt entity (and/or affiliates thereof ); • Exceeds 20 years in duration; or • Occurs after a sale of the property by, or a lease of the property from, the tax-exempt entity (and/or affiliates thereof ) and such property was used, prior to such sale or lease, by the tax-exempt entity.

...with some narrow exceptions, property leased to a pass-through entity that is wholly or partially owned by an ESOP is considered tax-exempt use property that must be depreciated pursuant to ADS... It is worth noting that in an effort to avoid further accelerated depreciation as it relates to nonresidential real property, IRC § 168(h)(1)(B)(iv) negates the use of cost segregation studies to avail lessors of a means of accelerating depreciation recognition for nonresidential real property treated as tax-exempt use property by stating: “For purposes of this subparagraph, improvements to a property (other than land) shall not be treated as a separate property.” Thus, with some narrow exceptions, property leased to a pass-through entity that is wholly or partially owned by an ESOP is considered tax-exempt use property that must be depreciated pursuant to ADS and is not eligible, in whole or

in part, for accelerated depreciation treatment pursuant to the General Rule nor Bonus Depreciation. So, what depreciation can a lessor to an ESOP realize? Under IRC § 168(g)(2), the ADS system for such tax-exempt use property is prescribed as: • The straight-line method (without regard to salvage value); • The applicable convention determined under subsection (d); and • A recovery period determined under the following table: In the case of:

The recovery period shall be:

(i) P roperty not described in clause (ii) or (iii)

The class life

(ii) P ersonal property with no class life

12 years

(iii) Residential rental property

30 years

(iv) Nonresidential real property

40 years

(v) Any railroad grading or tunnel bore or water utility property

50 years

The class life of particular listed asset classes (e.g., different types of equipment) is defined in IRS Publication 946. Additionally, IRC § 168(g)(3) imposes a further limitation on tax-exempt use property subject to lease, stating “In the case of any tax-exempt use property subject to a lease, the recovery period used for purposes of paragraph (2) shall (notwithstanding any other subparagraph of this paragraph) in no event be less than 125 percent of the lease term.” However, there are a few narrow exceptions to the depreciation treatment mandated by IRC § 168(g): • Under IRC § 168(h)(1)(C), tangible assets leased to tax-exempt entities are not treated as tax-exempt use property if such lease has a duration of less than (1) 3 years, and (2) the greater of 1 year or 30% of the property’s class life. • Under IRC § 168(h)(3), “Qualified Technological Equipment,” defined as computers or peripheral equipment (excluding calculators, typewriters, copiers, and similar equipment) and “high technology medical equipment,” is not subject to ADS depreciation treatment under IRC § 168(g) if such Qualified Technological Equipment is subject to a lease no longer than 5 years in duration (with an option to renew no longer than 24 months). • Various other more unique circumstances, including assets used outside of the United States or used in commerce across international borders, communications satellites, etc. As always, dial your friendly local tax attorney for more details…

December 2025 | 31

Therefore, with the aforementioned summarized narrow exceptions, tangible property leased to an ESOPowned – in whole or in part – S corporation (or LLC electing to be taxed as a S corporation) must, subject to the extent of the ESOP’s ownership of the pass-through entity, be depreciated on a straight line basis over the applicable recovery period determined by the longer of either (1) the property’s class life, or (2) 125% of the term of the lease.

for assets leased to tax-exempt entities, namely straight-line depreciation treatment over 125% of the lease term or the asset’s class life, whichever is longer. Common scenarios where the depreciation limitations of IRC § 168(g) applies include (but are certainly not limited to):

Takeaways and Common Applicable Situations in the ESOP Marketplace

• ESOP-focused banks, finance companies, and lessors provide financing to ESOP-owned companies structured as a lease rather than as debt; and

Applications of IRC § 168(g) in the ESOP marketplace are plentiful and, we fear, underappreciated. As stated above, since ESOP-owned entities enjoy an effective income tax exemption, practitioners often advise clients to forgo direct asset ownership in order to leverage their tax-exempt status – a scenario specifically addressed by the rules pertaining to “tax-exempt use property” in IRC § 168(g). While such planning is valid, lessors must plan on having depreciation deductions limited to what is allowable

• Selling shareholders retaining PP&E assets in a transaction or acquire PP&E assets post-transaction and lease them to the ESOP-owned entity;

• ESOP-owned businesses executing sale-leasebacks of real estate, rolling stock, and/or other PP&E assets to access lower-cost capital. Lessors to ESOP-owned businesses should be aware of this nuanced – but significant – limitation on depreciation deductions and are strongly encouraged to consult with tax counsel prior to executing a lease with an ESOP-owned pass-through company.

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ESOP Technical Publications ESOP Administration Handbook The ESOP Association Administration Handbook, an essential resource for anyone responsible for administering an ESOP, will take you from the beginning steps of setting up an ESOP through crucial aspects of compliance, all the way to government regulations and reporting. TEA’s past Advisory Committee Chair, Lori Stuart, says, “This book is absolutely essential for all ESOP Admins to own. No matter your experience or at what stage your company’s ESOP – this book provides every administrator with the resources needed to do their job effectively and efficiently.” Lynn Archer, Sr. Vice President, GreatBanc Trust Company, and former Chair of the Advisory Committee on Administration says “I’m really proud of the work our committee has done by giving thoughtful, detailed and comprehensive instruction on ESOP Administration. Whether the reader is a novice or a skilled professional – this Handbook is an essential resource.”

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The ESOP Association National Events To learn more and register for the ESOP Association’s events, visit esopassociation.org/events.

THE PROFESSIONALS’ FORUM 2026 February 4-6, 2026 | Charleston, SC

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