An ESOP is a qualified employee benefit retirement plan that allocates company stock to employees over time. ESOPs can yield various tax benefits to the sponsoring company and in many cases the selling shareholders, and are often used as a corporate finance strategy to align the interests of all company stakeholders. Below are some facts about ESOPs and the positive benefits they provide to the selling shareholder, the company, and employees.

  1. More than 6,000 companies have an ESOP in place across the United States, employing nearly 14 million working men and women.
  2. Productivity improves by 4-5% on average in the year an ESOP is adopted.1
  3. The average ESOP account balance going into the 2020 pandemic was more than double the average 401(k) account balance ($132,000 vs. $64,000) at a non-ESOP company.2
  4. 91% of ESOP workers feel they can live comfortably in retirement compared to only 49% of non-ESOP retirees.3
  5. Employee ownership helps narrow the wealth inequality gap in the United States.4
  6. ESOPs exist in a number of industries and most prevalent in manufacturing, professional/scientific/technical services, construction and finance/insurance/real estate.5
  7. Throughout the COVID-19 pandemic, employee-owned companies outperformed non-employee-owned companies in job retention, pay, and workplace health safety. ESOP companies are three to four times more likely to retain staff, less likely to make pay cuts (26.9% vs. 57.3%), and more likely to take protective measures against the spread of COVID-19 (98.3% vs. 88.9%).6
  8. S Corporation ESOPs provided higher distributions per participant than 401(k) plans.7
  9. ESOPs provide continuity within the communities they reside, preserving the jobs, products/services and economic contributions. When companies are sold to an outside third party, there are often redundancies in job roles resulting in layoffs and/or business closures and relocations that negatively impact local communities.8
  10. ESOP account values are not taxed while an employee is earning and are not considered in asset or income eligibility for federal or state tax.9An ESOP is a qualified employee benefit retirement plan that allocates company stock to employees over time. ESOPs can yield various tax benefits to the sponsoring company and in many cases the selling shareholders, and are often used as a corporate finance strategy to align the interests of all company stakeholders.  Below are some facts about ESOPs and the positive benefits they provide to the selling shareholder, the company, and employees.
  1. https://www.esopinfo.org/infographics/economic-power-of-employee-ownership.php
  2. https://esca.us/studies-and-surveys/study-by-nceo-finds-that-employee-ownership-provided-resiliency-and-financial-security-during-crisis
  3. https://esca.us/key-facts
  4. https://esopassociation.org/articles/employee-ownership-reduces-wealth-inequality
  5. https://www.nceo.org/articles/employee-ownership-by-the-numbers
  6. https://www.nceo.org/article/research-employee-ownership
  7. https://esca.us/wp-content/uploads/2022/04/EY-ESCA-S-ESOP-Analysis-2022.04.2257.pdf
  8. https://esopassociation.org/what-is-an-esop
  9. https://smlr.rutgers.edu/sites/default/files/Documents/Centers/Institute_Employee_Ownership/rutgerskelloggreport_april2019.pdf

ADDITIONAL RESOURCES