Employee-Ownership Creates Meaningful Retirement Savings

February 27, 2013

Home News Employee-Ownership Creates Meaningful Retirement Savings

An article that ran in the Washington Post this week, titled, Americans Anxious About Retirement, states that “Even as the economy slowly improves, the vast majority of Americans remain deeply worried about their ability to achieve a secure retirement, according to a new survey.” This new survey, completed by the National Institute on Retirement Security (NIRS), found that 55 percent of Americans are “very concerned” that the current economic conditions are harming their retirement prospects. Further, the poll reveals that an additional 30 percent reported being “somewhat concerned” about their ability to retire.

There are, however, companies structured as S corporation ESOPs that are directly contradicting this trend and have been throughout the past decade. In an ESOP, companies provide their employees with stock ownership, often at no cost to the employees. Shares are given to employees and are held in an ESOP trust until the employee retires or leaves the company. As a whole, S ESOPs have been credited with providing retirement security, job stability and worker retention, due to the culture, stability and productivity gains associated with employee-ownership. The culture of ownership that is created among S ESOPs allows for workers to truly have “skin in the game” and they know that the company’s success is their success. During a time when the majority of Americans have little to no savings for retirement, it is critical to highlight structures that help create meaningful savings for hardworking Americans.

Further, a 2005 report by the National Center for Employee Ownership found that employee owners’ retirement accounts were five to seven times greater than the average 401(k) plan. This financial security translated into considerably less turnover among employees and stocks that preformed four to nine times better than the general private sector.

These occurrences did not go unnoticed.  Last year, Congressman Ron Kind (D- WI) and Congressman Erik Paulsen (R-MN) showed their support for S ESOPs with an op-ed published in The Hill. The article touted the benefits of employee-ownership, including higher productivity and increased economic resilience, especially during economic slowdowns. Furthermore, they continued, “Private ESOP companies are increasingly providing strong and sustainable retirement savings for their workers. The ESOP structure affords small and medium-sized businesses the ability to support employee retirement savings that employees may not have otherwise.”

We applaud the continued support of S ESOPs by Congressman Kind and Congressman Paulsen and appreciate their recognition of S corporation ESOPs as a viable model to assist in providing meaningful retirement security.

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