Bill promotes retirement savings through ESOPsNews added by Benefits Pro on June 13, 2014

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By Nick Thornton

Employer Stock Option Plans generate billions in retirement savings every year.

Some research suggests employee-owners of S Corps have account balances three to five times higher than the average for 401(k) participants, and five to seven times higher for workers nearing retirement, according to Employee-Owned S Corporations of America, a group that lobbies on behalf of employee-owned S Corporations.

Such promising data may explain proposed bipartisan legislation in Congress to spur more employee-ownership in private industry.

This week, members of the House Ways and Means Committee introduced a bill that would encourage private owners to sell company stock to employees, provide technical assistance to companies interested in issuing ESOPs, and help preserve the Small Business Association certification for companies that do offer ESOPs.

“At a time when almost half of American workers lack retirement accounts, the S ESOP structure lets employees share in the capital as owners of their companies and provides workers meaningful retirement accounts,” said Rep. Dave Reichert, R-Washington.

Four Republicans and four Democrats authored the Promotion and Expansion of Private Employee Ownership Act of 2014.

“This bill empowers companies to become employee-owned, create new employee-owners, and provides retirement security to more American workers,” said Rep. Ron Kind, D-Wisc.

ESOP firms have preformed well over the past decade-and-a-half, increasing their employee base by more than 60 percent between 2001-20011, while the rest of the private sector saw flat or negative growth, according to a survey of ESOPs by Matrix Global Advisors.

The Labor Department says the number of S Corp ESOPs, and the number of active participants in them, have more than doubled since 2002.

“There has been a lot of discussion of late to the effect that owners of capital may be benefitting at the expense of workers,” said Steve Smith, chair of the ESCA. “We applaud this bipartisan effort to promote a structure that allows hard-working Americans to also own their companies’ capital, giving them rewarding jobs where they have ‘skin-in-the-game’ and investing in their future by building meaningful retirement savings.”

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