A group that advocates for employee-owned S corporations is rather proud of the findings in a new study showing strong, measurable evidence that having an employee stock ownership plan (ESOP) in place prior to the worst of the COVID-19 crisis helped employee-owned businesses not only to survive but also take better advantage of growth opportunities than their conventional, non-ESOP counterparts.
ESCA, which stands for the Employee-Owned S Corporations of America, cites a Feb. 1 NBC News report, which said workers at employee-owned private businesses are “staying put and reaping rewards” in a sharp contrast with the “deep disaffection among workers” at many traditional companies.
During the pandemic, the study shows ESOPs added rather than cut workers, and are likely to offer more generous benefits packages, including child care and tuition reimbursement plans.
The new study—conducted by the National Center for Employee Ownership (NCEO) on behalf of ESCA—found the average ESOP account balance going into the pandemic was dramatically higher—more than double—than the average 401k account balance ($132,000 vs. $64,000) at a non-ESOP company.
Controlling for size, industry, and location simultaneously, the S ESOP advantage is an estimated $67,000 more in retirement security. The study said this is “especially remarkable, given that just over half (50.5%) of American families have a retirement account at all.” Among those that do, the median account value was $65,000.
The average employer contribution to the S ESOP was more than 2.5 times that of companies offering only a 401k, and 94% of total contributions to ESOPs came from the employer, compared to 31% for 401k plans.
Notably, the ESCA said in a statement that most ESOP companies also offer traditional retirement benefits such as a 401k, in addition to providing employees with an ownership stake in the business as a benefit of employment.
Washington, D.C.-based ESCA speaks exclusively for employee-owned S corporations, and since 1998 its membership has grown to represent more than 220,000 employee-owners across the country. According to the National Center for Employee Ownership, there are roughly 6,500 employee-owned companies in the U.S., employing 14 million workers, or 8.6% of the labor force. ESOPs are most popular among manufacturing companies, construction firms and professional services concerns.
To read the new study’s full findings, CLICK HERE.
SEE ALSO:
• Success with Succession: How an ESOP Helps Maintain Company Culture and Legacy
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
