PLANSPONSOR - June - July 2022 - 11

approximately $1,350-24%-more to
participants during this period.
" The findings are yet another data
point demonstrating the relative strength
of ESOP ownership inside a privately
held company and the added benefits of
having an ESOP, not only to the company
but, more importantly, to the employees
who own the company through the trust, "
says ESCA President and CEO Stephanie
Silverman. " Having an ESOP isn't just
about returns; it's a cultural change, and
it requires a lot of commitment from the
company to the employee-owners. "
S ESOPs can accrue advantages also
for the business, a study from the National
Center for Employee Ownership found.
They serve as a retention tool as well as a
cushion, enabling employees to be more
financially resilient in a crisis.
In a typical ESOP-owned S corporation,
90% of the stock is held by the
employees, Silverman says. " It's important
to remember that, with an ESOP,
almost all of the contributions come
from the company; virtually none come
from employees themselves, so this is
an added benefit provided by companies
to employees as a way to enhance their
retirement savings, " she observes.
Companies with this plan tend to
have a different outlook, and having an
S ESOP available changes the company's
culture, she says. " People stay in
their jobs longer, and the company loses
less in energy, money, brand relationships
because turnover is lower, " she
says. " People work harder when they're
working for themselves. "
The IRS and Department of Labor
regulate S and C ESOPs, which are not
appropriate for every company, Silverman
notes. The IRS' tax code Section 409 T
details, for example, " that these structures
need to be broadly held, " she says. " And you
can't start a sole practitioner business and
then turn yourself into an S corporation,
because the law was intended to create a
broad-based benefit to workers. So there
are anti-abuse rules that are pretty clear. "
In addition, owners of LLC corporations
may not turn them into S corps, and participants
may not be non-U.S. nationals living
outside of the U.S.
Retirement plan participants with an
S ESOP available tend to benefit in other
important ways not provided by 401(k)s
and other DC plans, Silverman says.
TIDBITS
Definition of Retirement
In a recent study, pre-retirees and retirees said their parents viewed
retirement as a time to relax, but ...
Only 27% said they,
themselves, see today's
retirement as " a time for
rest and relaxation. "
55% defined it as " a
new chapter in life. "
Source: Edward Jones and Age Wave, " Longevity and the New Journey of Retirement "
" While not every company outperforms
the market, the Ernst & Young
research is a very large sample of companies
and a very strong proof point that
there are cultural and other benefits
inside ESOPs that continue to increase
their value, " she says. -Noah Zuss
PEP-ing Up the Market
One goal of the Setting Every Community Up for Retirement
Enhancement Act of 2019 was to prompt small businesses with
no employee retirement plan to possibly offer one via a pooled
employer plan arrangement.
Businesses
with 50 - 99
employees
39% very interested
Businesses
with 20 - 49
employees
34% very interested
59% somewhat interested
52% somewhat interested
Source: LIMRA Secure Retirement Institute
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