New Data Show That ESOPs and 401(k) Plans Heavily Invested in Company Stock Are More Likely to Have Other Retirement Plans as Well

According to testimony by Doug Kruse of Rutgers University before the House Subcommittee on Employer-Employee Relations of the Committee on Education and the Workforce (2/12/02), "about 70-75% of participants in plans that are heavily invested in employer stock [ESOPs, 401(k) plans, and profit sharing plans] are in companies that also maintain diversified pension [or other retirement] plans, indicating that such plans tend to supplement rather than substitute for diversified plans. Among participants in large ESOPs (over 100 employees), 66.2% are in companies also sponsoring defined benefit plans, 34.7% are in companies also sponsoring diversified defined contribution plans, and 75% are in companies that sponsor either of these diversified plans. The numbers are similar for non-ESOP plans that invest more than 10% of assets in employer stock, with 70% of participants in companies also sponsoring either type of diversified plan. While exactly comparable numbers for the full workforce are not comparable, employer survey data from the Bureau of Labor Statistics shows that 32% of all private-sector employees, and 50% of employees in medium and large establishments, participate in defined benefit pension plans. Therefore, it appears that participants in ESOPs and other plans heavily invested in employer stock are more likely than other employees to also be covered by defined benefit pension plans."

The new Kruse data supplement previous findings by Kruse and his Rutgers colleague Joseph Blasi that private companies with ESOPs are four to five times as likely as comparable non-ESOP companies to have other retirement plans.