FOR IMMEDIATE RELEASE

Contact: Brian Robertson, 202.466.4721

Net Assets Up More Than 300% in Just 10 Years

$30 Billion in Retirement Savings Distributions to Workers

WASHINGTON, D.C. (March 31, 2015) – New data compiled by EY’s Quantitative Economics and Statistics (QUEST) practice, shows that private employee stock ownership retirement plans (S corporation ESOPs) outperformed the S&P 500 Total Returns Index in terms of total return per participant by an impressively large margin (62%), net assets increased over 300%, and distributions to participants totaled nearly $30 billion from 2002 to 2012.

The EY study found that the total return for S ESOP participants from 2002 through 2012 was $99,000 for an 11.5% compound annual growth rate, 62% percent higher than the S&P 500 Total Returns Index’s 7.1% growth rate over the same period. Distributions to plan participants totaled nearly $30 billion in the same ten-year period, and paid significantly more benefits per participant than 401(k)s.

In addition, the analysis indicates that both the number of people participating in S ESOP plans and the value of those plans’ net assets have increased substantially since 2002. Net assets held in S ESOPs were 318% higher in 2012 than 2002, and participants with account balances rose from 240,000 in 2002 to 650,000 in 2012, an increase of 165%.

“This striking new study confirms what our members know from direct experience,” commented ESCA Chairman Steve Smith, Vice President-General Counsel of Amsted Industries. “They know first-hand that S ESOPs are providing secure retirements for their workers and economic benefits to their communities. These compelling findings—showing strong and continuing growth in net assets, distributions, average account balances, and number of participants with accounts—make that even more apparent. S ESOPs are a model for how to make retirement security a reality for the broad American middle class.”

“The report finds that S ESOPs are providing an increasingly important role in supporting the retirement security of their participants,” said Robert Carroll, National Director of QUEST and one of the study’s authors.
Thousands of companies across the United States are private businesses owned by employees through Employee Stock Ownership Plans (ESOPs), a type of defined contribution retirement plan. The vast majority of these companies are majority or wholly employee-owned. Tax rules enacted by Congress in the late 1990s were intended to encourage employee ownership.

Today, S corporation ESOPs are doing exactly what Congress intended when it established them: generating economic activity, creating jobs, and promoting retirement savings. By any measure, these companies have been a remarkable success story in recent years: truly a bright spot in an economy characterized by sluggish growth, anemic job creation, and worker insecurity.

Prior reports have shown that S ESOP companies have lower default rates and weather economic storms better than their non-ESOP counterparts. In 2014, the National Center for Employee Ownership compiled new data showing that private employee-owned businesses default on their loans far less than other businesses. A 2010 by economists Phillip Swagel and Bob Carroll, both former senior Treasury Department officials, found that, during the most recent economic recession, S ESOP firms they surveyed increased employment by nearly 2%, at the same time that overall, employment in the private sector fell by nearly 3%. In his 2013 study, Macroeconomic Impact of S ESOPs on the U.S. Economy, economist Alex Brill of Matrix Global Advisors wrote, “Beyond the immediate benefit they provide to employees and customers, S ESOPs’ positive outcomes yield benefits to the U.S. economy broadly.” Brill’s analysis found that total direct and indirect output from these companies accounts for nearly 2% of gross domestic product.

Bipartisan legislation is scheduled to be introduced in both the House and Senate to encourage more private companies to convert to ESOPs.

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The Employee-Owned S Corporations of America (“ESCA”) is the Washington, DC voice for employee-owned S corporations. ESCA’s mission is to preserve and protect S corporation ESOPs and the benefits they provide to the employees who own them. For more information, go to www.esca.us.