New study on financial security and employee ownership in times of crisis

The National Center for Employee Ownership (NCEO) recently released a study on behalf of Employee-Owned S Corporations of America measuring the financial impact of employee ownership in times of crisis. The study analyzed retirement account balance data from December 2019 (pre-pandemic) to December 2020 (peak of the pandemic) for more than 300,000 pension plan deposits covering more than 43 million employees. This data set included employee stock ownership plans (ESOPs) from S corp and a comparable group of companies offering a 401(k) plan.

Based on the results of the study, here are some key findings:

  • Companies with an ESOP before the pandemic provided greater financial security and better job retention for employees before and during the pandemic.
  • At the start of the pandemic, the average ESOP account balance was more than double the average 401(k) account balance at comparable non-ESOP companies ($132,000 ESOP balance versus $64,000 401(k)). This creates about $67,000 more in retirement security for ESOP participants after controlling for company size, industry, and region.
  • The average annual employer contribution to an ESOP was 2.6 times that of companies offering a 401(k) ($6,567 employer contribution to ESOP vs. $2,507 employer contribution). employer 401(k)).
  • Employer contributions accounted for about 94% of all ESOP contributions, compared to 31% for 401(k) plans.
  • When controlling for company size, industry and region, ESOP-owned companies retained or added six more employees from 2019 to 2020, compared to non-ESOP employers.
  • In addition, nearly 80% of S corp ESOPs also offer a 401(k) plan.

In conclusion, the study found measurable evidence that having an ESOP in place before times of crisis not only helped employee-owners weather the storm of uncertainty, but also provided opportunities for growth. compared to their non-ESOP counterparts. In addition, employee ownership provides employees with a greater level of financial and retirement security than employees with only a traditional 401(k) option.

To learn more about ESOPs, contact your BKD Trusted Advisor™ or submit the Contact Us form below.

Sarah J. Greer