Companies with ESOPs Offer More Generous Retirement Benefits

Posted by Aaron Juckett, CPA, CPC, QPA, QKA on Wed, Nov 21, 2012
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We have spent some time discussing the many benefits of Selling to an ESOP.  One of the arguments against an ESOP is that the employees will have a diversification problem because all of their investments will be in the stock of the company.  ESOP Fable 2: Employees Have All Their Eggs in One Basket! does a great job of addressing this myth. 

This has also been supported by employee ownership research.  The NCEO reviewed the IRS Form 5500 Data and concluded that ESOP Companies Offer More Generous Retirement Benefits:

  • ESOP companies are more likely to offer a second DC plan than non-ESOP companies are to offer any DC plan at all;

  • ESOP companies contribute substantially more to their ESOPs than companies with non-ESOP DC plans contribute to their DC plans;

  • The average ESOP participant has 20% more DC assets than the average participant in a non-ESOP DC plan, and far less of it comes out of the employee's pocket.

  • Considering only DC assets originally contributed by the company, ESOP participants have approximately 2.2 times as much in their accounts as participants in comparable non-ESOP companies with DC plans.

Topics: Studies and Statistics, Employee Stock Ownership Plan (ESOP)

Aaron Juckett, CPA, CPC, QPA, QKA
Written by Aaron Juckett, CPA, CPC, QPA, QKA

Aaron is President and Founder of ESOP Partners and provides implementation, administration, and consulting services to hundreds of companies. He is a member of The ESOP Association (TEA) and the National Center for Employee Ownership (NCEO).

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