WASHINGTON – With financial stability and retirement security at the top of Americans’ minds, 401(k) Specialist reports on a new analysis by Ernst & Young (EY), which finds that employee-owners of privately held businesses called S corporation ESOPs benefit from far better retirement savings and job security compared with other U.S. workers.
The “analysis—which EY conducted on behalf of the Employee-Owned S Corporations of America (ESCA)—examines trends in S ESOP retirement plans from 2002-2019, including S ESOP plans’ net asset value, number of participants, average account balances, and distributions to participants,” the magazine reports.
The EY analysis reveals that “S ESOPs distributed 25% more on a per-participant basis than 401k plans on average during that 18-year period. S ESOP participants received an annual average of $5,900, while 401k plans distributed an annual average of $4,700 between 2002-2019,” the report states, adding: “Focusing on average distributions after the Great Recession, S ESOP participants received an annual average of $6,700, while 401k plans distributed an annual average of $5,400. S ESOPs distributed approximately $1,350 more (or 24%) to participants during this period.”
The report adds: “The EY analysis found that the role of S ESOPs in enhancing retirement security grew significantly during the study period. Both net assets and the number of employee-owners rose significantly between 2002 and 2019. Net assets were 678% higher in 2019 ($94 billion) than in 2002 ($12 billion) and the number of participants increased by 286%, from 244,000 in 2002 to 941,000 through 2019. The average S ESOP account balance was over $100,000 in 2019, and an individual employee-owner participating in an S ESOP gets nearly $26,000 each year as an added benefit. This figure takes into account firm contributions, increased job security, and growth in S ESOP assets, the EY report states.”
A separate study released earlier this year by ESCA and the National Center for Employee Ownership (NCEO) found that employee ownership of private businesses through employee stock ownership plans (ESOPs) provided exceptional resiliency and financial security in the face of pandemic-driven economic challenges. In reporting on the study, NBC News noted that while record numbers of Americans have quit their jobs in what has been dubbed the “Great Resignation,” 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.