The SECURE Act 2.0 of 2022’s provisions on Worker Ownership, Readiness, and Knowledge (WORK) directed the Department of Labor (DOL) to establish an initiative to promote employee ownership and employee participation. The DOL’s Employee Benefits Security Administration (EBSA) issued a report to Congress to provide an update on this initiative. The report outlines recent trends in employee ownership and the DOL’s efforts to continue enhancing it. This article explores the details of the report.
How Has ESOP Participation Grown?
While the number of employee stock ownership plans (ESOPs) has remained steady over the years, there has been significant growth in the number of ESOP participants and the total assets in ESOP plans. The report shows that the total number of ESOP participants has grown 8% from 2014 to 2023, with over 15 million participants across leveraged and non-leveraged ESOPs and KSOPs (combined ESOP and 401(k) plans). Plan assets have grown at an even faster pace of 57% over the ten-year period. In 2023, the average assets per ESOP plan was $314 million.
The report goes on to outline several reasons why employee-owned plans might be growing in popularity and size. The aging demographics of the U.S. are seeing the baby boomer generation reaching retirement age, and ESOPs are an opportunity for sellers to seek liquidity without selling to outside buyers. There has also been a steady increase in the number of state governments showing direct support for employee ownership. In addition, universities are coming together to study further the employee-owned structure as popularity continues to grow.
How Does DOL Support Employee Ownership Expansion?
EBSA officially established the Division of Employee Ownership (DEO) in June 2023 to support the promotion and growth of employee ownership. The DEO chief has broken out its work into the following categories:
- Outreach, education, and stakeholder relations
- Support for (state employee ownership programs) SEOPs
- Early-stage technical assistance for employers and employees on questions related to employee ownership
- Development of an online clearinghouse of information on employee ownership and participation
Since its establishment, the DEO has worked to build a solid foundation for future programs and establish relationships at the federal, state, and local levels with employee-owned stakeholders. The report concludes with future work that the DEO hopes to expand its initiative, subject to available resources once appropriations have been allocated.
How Forvis Mazars Can Help
Forvis Mazars understands how critical it is to consider various ESOP matters when developing plans for the future. Whether you are considering an ESOP for your organization or would like to learn more about ESOPs, please reach out to a professional at Forvis Mazars.