Employees in Closely Held ESOP Companies Average $73,500 in Plan Distributions

The NCEO analyzed data from the Department of Labor to find out what a typical ESOP participant receives as a distribution from the plan. Subject to some severe limitations in the original data, we found that the average distribution to a departing employee in 2009 and 2010 (both of which were recession years) was $73,500. Most ESOP participants also have access to other retirement plans through their employer.

There are no direct comparison data for 401(k) plan distributions, but based on analyses by the Employee Benefit Research Institute, the mean account balances for employees over 30 years old and with 5 to 20 years of tenure in 401(k) plans is between $52,000 and $90,000. Given typical tenure patterns in closely held companies for employees in these companies, that suggests mean distributions would fall somewhere in the middle of this range.

While this is comparable to ESOP distributions, roughly two-thirds of 401(k) account balances are contributed by the employee, whereas (with a few exceptions) all of the ESOP account balances come from employers. ESOPs are required to cover all employees meeting minimum tenure requirements, while 401(k) plans generally only include employees who contribute to the plan. As a result, about 25% of eligible employees, generally the lowest paid group, do not benefit from the plan.

A state-by-state analysis of the data is available by contacting Corey Rosen ([email protected]). The NCEO urges its members to use the data to send out their own press release to local reporters about their own distributions over the last years, and we have ready-to-use materials to help.