The Department of Labor Form 5500s are the most commonly cited source of information on Employee Stock Ownership Plans. If you are part of the employee ownership community, have been to a conference, or even just read an overview of the employee ownership space, you have likely seen statistics derived from the 5500s. For example, there are around 6,237 Employee Stock Ownership Plan (ESOP) companies in the US with roughly 14 million participants.
The 5500s are certainly an important source of information for the employee ownership community. But they also have a fundamental limit: not all ESOPs are employee-owned, and many employee-owned companies don’t have an ESOP. As every business person knows, if you want to grow, you have to measure what matters. Getting an accurate count of the number of employee-owned companies in America requires a simple standard that applies across all ownership structures. Our certification provides just such a standard.
Despite their shortcomings, the 5500s remain a vital source of information on employee ownership. This article will give you a crash course including:
- What exactly are the Department of Labor (DOL) 5500s?
- 6,237 companies with an ESOP
- The 10 largest ESOPs in 2020
- Certification measures what matters
- Appendix: how to download the ESOP dataset
What Exactly Are the Department of Labor (DOL) 5500s?
The Department of Labor oversees employee benefit plans created by the Employee Retirement Income Security Act of 1974 (ERISA), including Simplified Employee Pension Plans (SEPs), Profit Sharing Plans, 401(k)s, and ESOPs. Any company maintaining one or more of these plans is required to report key plan information to the DOL on an annual basis via the Form 5500. The DOL maintains a public archive of fillings going back to 1999, and anyone can access the data directly.
For advocates of employee ownership, the data have a few challenges. Companies can apply for extensions and submit updated fillings, which creates duplicates. As with all self-reported information, some variables are extremely noisy. Collection takes quite a bit of time, so complete DOL fillings come out on an approximate two-year lag. Finally, companies with an ESOP are not required to report the total percent of the company owned by their employees, so there’s no way to tell how much of the company is owned by the ESOP.
6,237 Companies With an ESOP
As of June 2023, the most recently available and complete DOL filling is the 2020 vintage (see Appendix for more detail). If you download the files from the DOL website, you will be struck by the size. You can open the CSV in excel but your computer might need some time to think because the file contains over 248,000 rows. Did the number of ESOPs increase dramatically? Unfortunately not.
The file is much larger than the number of ESOPs because, as mentioned above, all employee benefit plans are required to submit an annual Form 5500. Selecting all fillings with an ESOP yields 6,603 rows. Added together, these fillings report 14,150,373 total participants and 10,304,341 active participants.
But some companies have submitted multiple fillings. Others indicate a plan year that is well before 2020, in one case as early 2000. Ignoring these and counting only unique EINs we find 6,237 companies reporting 13,321,687 total participants and 9,755,354 active participants.
The 10 Largest ESOPs in 2020
Sorting this list by number of active participants we can get a sense for the 10 largest companies with an ESOP:
To members of the employee ownership community, this list is probably surprising. These aren’t the companies that come to mind when we think of large, employee-owned businesses. It helps to remember that companies with a wide variety of employee benefits plans are required to file a Form 5500.
These companies are likely checking the ESOP box because they have an Employee Stock Ownership Plan that owns a small portion of the company, in addition to the many other employee benefit plans they offer (Walmart, for example, indicates 8 plan types). It might even be a legacy plan that is inactive. Due to the aggregate nature of the 5500s, it’s difficult to tell.
Certification Measures What Matters
The data quality issues highlighted above might cause some doubts about the reliability of the DOL 5500s. But the list of the 10 largest ESOPs points to a more fundamental issue: there’s a difference between ESOP and employee-owned. While they are a useful source of information, ultimately the DOL 5500s cannot tell us the number of employee-owned companies.
Accurately measuring the size of employee ownership requires a definition of “employee-owned” that can be applied to any company. Certification provides many benefits, including a consistent standard that enables an accurate count of employee-owned companies. And as every business person knows, you have to measure what matters in order to create growth.
At Certified EO, we have spent the past five years creating the infrastructure required to accurately count the number of employee-owned companies in real time. We have consolidated the publicly available sources of data of employee ownership, resolved the data issues, verified key variables by hand, and supplemented the raw data with critical information like the percent of the company owned by employees.
The result of thousands of hours of work is our Directory of Employee-Owned Companies. The Directory provides an up-to-date number of employee-owned companies that changes as soon as we learn new information. It also transparently lists every employee-owned company and facilitates exploration through search and filters.
The good news is that there are more employee-owned companies than companies with ESOPs! As of June 9th, 2023, our Directory lists 6,390 employee-owned companies, more than the number of companies with ESOPs listed in the 2020 DOL fillings. Using data collected during our certification process we estimate that employee-owned companies employ between 2 million to 3 million Americans. These numbers represent a more accurate measure of employee-owned companies and are a starting point for growth for our community.
Appendix: Step-By-Step Instructions for Downloading the ESOP Data From the DOL 5500s
- Go to the Form 5500 Datasets page on the Department of Labor website.
- Choose which year of data to download. In my experience, data sets are completed in the Fall on a 2-year lag. According to the DOL, companies are required to file on “the last day of the seventh month after the plan year ends (July 31 for a calendar year plan),” but it seems like it takes a while for submissions to end up in the public data. For example, on June 12th, 2023 I downloaded the 2021 fillings and found roughly 6,100 entires for ESOPs. Either the number of ESOPs dropped dramatically from 2020 to 2021 or, more likely, the dataset is still being completed. Based on past years, I would expect that to happen in October of 2023 for the 2021 fillings.
- Open the data and filter for ESOPs using the TYPE_PENSION_BNFT_CODE variable. Values of 2O, 2P, and 2Q correspond to non-leveraged ESOP, leveraged ESOP, and S corporation ESOP, respectively. Notice that companies will often have more than one plan type, it might be helpful to create a formula that returns true if the TYPE_PENSION_BNFT_CODE variable contains one of the ESOP indicators.
- Explore. After filtering you should see around 6,600 rows of data for the 2020 fillings, but be mindful of duplicates and late fillings. Sort by size (TOT_PARTCP_BOY_CNT) to begin your exploration.
