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EY Study Shows ESOP Participants Fare Much Better

A new study, “Contribution of S ESOPs to Participants’ Retirement Security and Employee-Owner Benefits,” prepared for the Employee-Owned S Corporations of America (ESCA) by EY (formerly Ernst & Young), finds that:

  • The average cumulative return per participant in S corporation ESOPs from 2002 through 2019 was over $300,000, for a compound annual growth rate of 12.1%, which is approximately one-third higher than returns from the S&P 500 over this time period. This includes cumulative distributions and the growth in the value of net assets, net of cumulative contributions.
  • Net assets in S corporation ESOPs were 678% higher in 2019 ($94 billion) than in 2002 ($12 billion), and the number of participants increased by 286%, from 244,000 in 2002 to 941,000 through 2019.
  • The average S corporation ESOP account balance was over $100,000 in 2019. The average increased 100% from 2002, and the average S corporation ESOP account balance was higher than any previous point in the last 15 years. (The NCEO found a different number in its study of S corporation ESOP account balances in 2019, with a median account balance of $134,000.)
  • Distributions to participants totaled over $77 billion from 2002 through 2019, and annual distributions increased almost 13-fold during this period.
  • S ESOP companies were more likely to offer two retirement plans than all private sector companies were to offer a single retirement plan in 2018 (the latest year for which data is available). All S ESOP companies offered at least one retirement plan, and 57% of S ESOP companies offered an additional retirement plan, such as an additional defined benefit and/or defined contribution plan, while only 51% of all private establishments offered any retirement plan.
  • Employee-owners received an estimated annual benefit of more than $25,900 from working for an S ESOP company in 2019. Approximately 30% of those benefits came directly from working for S ESOP companies in the form of firm contributions to employee-owners’ ESOP account balances and increased job security. The remaining share was from returns in employee-owners’ ESOP account balances.

The study was based on an analysis of Form 5500 returns.