WASHINGTON – In case you missed it, a new study – conducted by the National Center for Employee Ownership (NCEO) on behalf of the Employee-Owned S Corporations of America (ESCA) – finds 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.
“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,” 401(k) Specialist reports. They add that “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.”
Meanwhile, 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,” they report. 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.
The study’s key findings include:
- Businesses with an ESOP in place provided greater financial security for employees heading into and during the pandemic, and job retention at the firm level compared to comparable conventional firms.
- The average ESOP account balance going into the pandemic was dramatically higher – more than double –than the average 401(k) 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 – especially remarkable, given that just over half (50.5 percent) 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 401(k), and 94 percent of total contributions to ESOPs came from the employer, compared to 31 percent for 401(k) plans.
- Notably, most ESOP companies also offer traditional retirement benefits such as a 401(k), in addition to providing employees with an ownership stake in the business as a benefit of employment.
- Using active participants as a proxy for employment, and controlling for company size, industry, and region, being an ESOP is associated with retaining or adding an additional 6 employees from 2019 to 2020, compared to non-ESOP employers.
NBC News recently reported on the study’s findings, noting that even during a time of record resignations economy-wide, 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.
- To read the new study’s full findings, CLICK HERE.
- To learn more about the Employee-Owned S Corporations of America (ESCA), CLICK HERE.