Written by
GREG KLEIN
6:33 PM, Nov. 2, 2011
Just in time for the first wave of baby boomers to turn 65, Americans have reached a new low in their expected ability to retire.
In fact, less than a quarter of workers are confident in their ability to pay basic living expenses after they retire — down from roughly half in 2008 at the height of the recession — according to a survey out this week from Sun Life Financial Inc. What’s more, confidence in the future of Social Security has plunged to 9 percent this year, down from 22 percent in 2008, and one in five working Americans say they will simply never retire.
More important than how we got here is how we reverse the trend. Thousands of workers in Iowa, at corporations that range from professional portrait companies to manufacturers of eyeglasses to truck parts distribution companies, are working toward more certain and secure retirements as a result of being a part of an “S corporation employee stock ownership plan” (S ESOP).
While more than 50 percent of working Americans do not have any employer-sponsored retirement savings plans — no doubt a factor contributing to this week’s survey results — all employee owners at S corporation ESOPs do have a plan, and that plan is wholly funded by their companies. Additionally, research has shown that 80 percent of these companies offer their workers more than one qualified retirement plan.
These private, employee-owned companies create retirement account balances that are three to five times higher than the average 401(k) or other defined contribution plans.
Nationally they generate $14 billion in new savings each year for their workers — beyond what they otherwise would have earned. This is because profits of the company flow into the ESOP accounts of the workers to be used for retirement.
If ever there were a time for our leaders in Washington to preserve and expand such a structure, it is now.
As the American workforce braces for more years in the field and less financial certainty once out of it, three Iowa congressmen, Rep. Leonard Boswell, Rep. Bruce Braley and Rep. Dave Loebsack, have cosponsored a bill to help eliminate barriers that currently exist for companies that want to become employee-owned.
By supporting this measure, these representatives are working to not only turn the tide on America’s retirement insecurity but also create high-performing businesses and economic activity. Because employee-owners have a vested stake in the company’s bottom line, they operate with increased motivation and success.
In fact, S ESOPs have demonstrated a striking resilience — growing and hiring new workers, even during the recession, as their counterparts have been shrinking.
While overall U.S. private employment in 2008 fell by 2.8 percent, employment in S ESOP companies rose by nearly 2 percent, according to one study by Georgetown University.
With an economic forecast that remains bleak and the future of Social Security yet uncertain, it’s unlikely that workers in Iowa and across the country will soon ease their concerns over retirement.
However, preserving and expanding America’s private, employee-owned companies can help reverse the trend for countless American workers who may benefit from the S corporation ESOP structure.
ABOUT THE AUTHOR
GREG KLEIN is vice president and chief financial officer of Inland Truck Parts, an S ESOP company with employee-owners in 10 states, including more than 50 employees in Iowa. He serves as chairman of the board of directors of the Employee-Owned S Corporations of America.