ESOPs Play Surprisingly Large Role in Private Retirement Plans

New data from the Employee Benefit Research Institute (EBRI) shows that just 56.8% of working adults between ages 21 and 64 are eligible for a retirement plan and only 45.1% actually participate in a plan. The numbers are even more dismal for employees in companies with 10 to 100 employees, where only 31% participate in a retirement plan. Most of these workers are in defined contribution plans. Only about 20% are covered by traditional pension plans. In 401(k) plans, other EBRI data have shown that the typical employer contribution comes to only about 3% of eligible pay.

There are about 10 million participants in ESOPs and plans that function much like them, meaning ESOPs account for close to 20% of all private sector plan coverage for working adults (a precise number is not possible because we do not know how many ESOP participants are under 21 or over 64). The typical corporate contribution to ESOPs is about 8% to 10% in privately held companies; more importantly, a very large majority of ESOPs sponsor an additional retirement plan. Recent data are not available for public company ESOPs, but most of these are used as 401(k) matches, and they would tend to be at similar levels as other 401(k) contributions.