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Metcalfe and Gaydos Discuss Successful Implementation of Employee Stock Ownership Plans at Nicklas Supply Inc.
I wanted to share this news release with you regarding Wednesday’s visit to Nicklas Supply Inc. and my Employee Stock Ownership Plan (ESOP) legislation (House Bill 285).

CRANBERRY TOWNSHIP – Representatives Daryl Metcalfe (R-Butler) and Valerie Gaydos (R-Allegheny) participated in a sit-down conversation/tour on Wednesday with the ownership and staff of Nicklas Plumbing Inc. and several financial experts to discuss the many benefits and advantages that Employee Stock Ownership Plans (ESOPs) have for family-owned businesses, communities and the economy.

Back row (Left to Right) – Kevin McPhillips, Pennsylvania Center for Employee Ownership; Nicklas Plumbing President Mark Nicklas; Metcalfe; Gaydos; Matt Nicklas and Ben Nicklas.

Front row (Left to Right) – Rosie Evans, Pennsylvania Center for Employee Ownership; Joshua Nicklas; Dan Zugell, Business Transition Advisors; and Martha Nicklas.

Founded in 1956, Nicklas Supply is a wholesale plumbing supply business that has 70 employees and five stores serving the majority of western Pennsylvania.

“ESOPs serve the dual purpose of delivering real retirement savings and stock ownership for employees, as well as the potential of a tax-free exit strategy to keep family-owned businesses in the family,” said Metcalfe. “Additionally, employees contribute absolutely nothing out of pocket or paycheck for this outstanding benefit. The purpose of my legislation is to increase the incentive for family-owned businesses and other employers to sell their business to an ESOP rather than outsiders whose intentions and the fate of current employees are always unknown.”

Authored by Metcalfe and co-sponsored by Gaydos, House Bill 285 would put Pennsylvania on par with 48 other states by applying certain provisions of the federal tax code at the state level and allowing eligible business owners who sell their stock to an ESOP to indefinitely defer and possibly eliminate the capital gains taxes normally collected at the sale of the business.

“This is a great opportunity for employees to fully engage in capitalism and obtain ownership within a company that they are sufficiently involved,” said Gaydos. “If employees share the risk, then they should garner the results. This legislation helps to incentivize all parties to work on common goals which can have so many positive effects on the community.”

House Bill 285 is currently awaiting consideration in the House Finance Committee. Under an ESOP plan, workers pay nothing to participate and the profits from the employee-owned portion of an ESOP business are tax-free.

“What I like best about having an ESOP is that everyone now has a skin in the game,” said Nicklas Supply President Mark Nicklas. “The better the business does, the more employee ESOP shares are worth. The tax advantages are huge for us and we can reinvest the profits back into our business.”

Also present at Wednesday’s ESOP event, Dan Zugell, senior vice president for Business Transition Advisors in Pittsburgh, has helped dozens of retiring business owners, including Nicklas Supply, set up an ESOP succession plan that makes sense for both employers and employees.

“From our initial conversation in 2018, Mark expressed his desire to honor and preserve his family’s legacy while doing right by his employees,” explained Zugell. “The ESOP has allowed the family to fulfill their desire to expand the definition of ‘family’ to include their employees whose efforts contribute to making Nicklas Supply the successful and respectful company it is today.”

According to the National Center for Employee Ownership, ESOP-owned employers are 25% more likely to stay in business and ESOP employees have 2.5% greater retirement account balances and earn 5%-12% more in wages.

“What Mark has done is amazing,” added Pennsylvania Center for Employee Ownership (PaCEO) Executive Director Kevin McPhillips. “He preserved the legacy of a great company. He ensured the financial future of his employees. He created a tax-free company and he bolstered the future of the great community of Cranberry Township. All of this while getting full value for his company, to care for his family’s future. We congratulate everyone at Nicklas Supply and thank Mark for being a genuine example of forward-thinking business leadership.”

There are dozens of ESOP companies in and around Butler County and the greater Pittsburgh area that are either partially or fully employee owned, including KTA-Tator, Silver Star Meats, Tech Met and Thermo Twin Industries.

There are roughly about 6,000 ESOP companies nationwide and 300 ESOPs across Pennsylvania, including Dansko, Hoss’s Family Steak and Seafood, McKean Defense Group, Sheetz and Wawa.
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