NCEO Methodology for Counting ESOPs
For our counts of the numbers of ESOPs, related plans, and participants, see our Statistical Profile of Employee Ownership.
The most comprehensive data on ESOPs is collected on the Form 5500. The Form 5500 series is a set of forms developed by the Department of Labor (DOL), the Internal Revenue Service, and the Pension Benefit Guaranty Corporation so that benefit plans such as ESOPs could satisfy annual reporting requirements under the law.
Historically, the NCEO has attempted to count the number of ESOPs by including estimates for the number of companies with missing data and for companies with plans that, while not literally ESOPs, function similarly to ESOPs in many ways.
For clarity and comparison purposes, moving forward our counts will report separately the number of "literal ESOPs" (plans that file as ESOPs) and "ESOP-like plans" (profit sharing, stock bonus, and other non-ESOP defined contribution plans that invest substantially in company stock).
Further, this is the first time the NCEO has worked with the DOL's edited Research Files to count ESOP and ESOP-like plans, as opposed to the unedited Excel files available through the DOL FOIA website. The NCEO downloaded into SPSS and analyzed the research files made available at the DOL website.
The Research File is created each year by the Employee Benefits Security Administration's (EBSA) Office of Policy and Research (OPR) at the DOL and is used to generate and analyze aggregate statistics on the characteristics of the private pension plan universe. For a given year, the Research File includes data on retirement benefit plans filing a Form 5500 that reported a plan year ending date in the given year. Direct Filing Entities (DFEs), welfare plans, one-participant plans, public retirement plans, and duplicate filings of other retirement plans are excluded from the Research File. Before 2010, the research file included Form 5500 filings from all private pension plans having 100 or more participants and a 5% sample of smaller private pension plans. Beginning with the 2010 Research File, sampling is no longer used because all large and small defined benefit and defined contribution plans are now included.
These edited files, now going back to 2000, are the result of significant work done by DOL based on their historical knowledge of the companies and plans to correct for common errors and to weight the data to more precisely account for missing data and late filers. The unedited files are the data as it comes in with little corrections and no weighting for missing data. These data, while fine for checking on the very latest filing of a particular plan or plans, are not optimum for aggregate counts or historical analysis.
Following DOL standard practices, our count of literal ESOPs is based on the plan characteristic codes filled in by the sponsor on line 8 of the form, or these codes were added as a result of the DOL's cleaning and editing of the data: 2O ("ESOP other than a leveraged ESOP") or 2P ("Leveraged ESOP—An ESOP that acquires employer securities with borrowed money or other debt-financing techniques"). Unlike the DOL, however, our count also includes plans without the 2O or 2P codes but with the code 2Q ("The employer maintaining this ESOP is an S corporation").
Our count of ESOP-like plans include all defined contribution plans not identified as ESOP plans (i.e., they did not indicate 2O, 2P, or 2Q) with at least 20% of total plan assets invested in employer securities and at least five participants.