(Washington DC) – On the heels of a Senate Finance Committee tax reform hearing considering the state of Americans’ retirement preparedness, Phillip Swagel, former assistant secretary for economic policy at the Treasury Department, told lawmakers that expanding opportunities for S corporation employee stock ownership plans, or “S ESOPs” would provide more working Americans the opportunity to generate retirement security and contribute to increased national savings and job creation.
Swagel, an economist who served in both the Bush and Clinton Administrations, noted that U.S. workers at S ESOP firms “have employer-provided retirement contributions that are superior to those received by employees of firms in the overall economy.” This is because profits of such employee-owned private companies flow into the ESOP (retirement) accounts of the workers, many of whom otherwise would not have the ability to save for retirement.
Responding to the Committee’s findings that too many Americans are left without sufficient resources to live comfortably in retirement, Swagel noted, “S-ESOPs make substantial contributions to workers’ retirement security. They do this by giving employees ownership of the company and building their retirement security with set-aside funds in ESOP accounts. This stands in stark contrast with the fact that, according to the Employee Benefit Research Institute, only half of Americans in 2008 worked for an employer that provided employees with any kind of retirement savings plan, and not much more than 40 percent of workers participated in such plans.”
Swagel’s full statement may be found by clicking here.
In addition to their ability to generate retirement security, S ESOPs have shown to be high performing businesses that create jobs and economic activity. According to a Georgetown University study co-authored by Swagel, S ESOPs have been better able to weather economic downturns, preserve jobs and, in the case of the recent recession, have grown wages in comparison to their non-S corporation ESOP counterparts. As a result, they create additional revenue for the Treasury by producing economic activity, American jobs, and more taxable retirement income for millions of workers.
Members of Congress from the tax-writing committees in the House and the Senate have responded to this data by introducing bipartisan legislation—the Promotion and Expansion of Private Employee Ownership Act of 2011 (H.R. 1244 and S. 1512)—to encourage more companies to adopt the employee-ownership structure.
“The S-ESOP works to boost retirement preparedness while contributing to increase saving and U.S. economic vitality,” said Swagel. “This is good for workers, business and American taxpayers as a whole.”
Phillip L. Swagel served as assistant secretary for economic policy at the Treasury Department during the George W. Bush administration. During his tenure, he advised Secretary Paulson on all aspects of economic policy. During the Clinton administration, Mr. Swagel was chief of staff and a senior economist at the White House Council of Economic Advisers. Additionally, he has served as an economist at the IMF and the Federal Reserve Board. Mr. Swagel is a professor at the University of Maryland’s School of Public Policy, a non-resident scholar at the American Enterprise Institute and an advisor to the Employee-Owned S Corporations of America (ESCA).
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The Employee-Owned S Corporations of America (“ESCA”) is the Washington, DC voice for employee-owned S corporations. ESCA’s exclusive mission is to preserve and protect S corporation ESOPs and the benefits they provide to the employees who own them. These companies have an important story to tell policymakers about the tremendous success of the S ESOP structure in generating long-term retirement savings for working Americans and their families. ESCA provides the vehicle and the voice for these efforts. ESCA represents employee-owners in every state in the nation.