The federal government is encouraging employers to adopt worker cooperatives and employee stock ownership plans

Participation in employee stock ownership plans (ESOPs) grew 8% from 2014–2023. Now, the Department of Labor (DOL) is encouraging more employers to offer the benefit, according to a new report.

ESOPs allow employees to become part owners in their employer’s business. Ownership can grow over time, and can be offered instead of or in addition to a 401(k) plan. The US government established this type of ownership model in 1974 to help close the wealth gap, but has encouraged employers to offer it more frequently in recent years.

The report was released as part of the requirements outlined in the SECURE 2.0 Act of 2022, which requires the DOL to educate businesses on and encourage adoption of employee ownership through, for example, tax benefits, which are available to companies that are at least 30% employee owned.

Roughly half of ESOP plans have “fewer than 100 participants,” and 67% are offered by companies that also provide other retirement benefits, including 401(k)s, according to the report. The 8% increase saw 15.1 million employees participate in an ESOP in 2023; 14 million participated in 2014, the report found. However, the number of participating businesses has remained consistent over the past decade.

Some states, including California, Michigan, and Washington, support employee ownership by helping businesses adopt the model, according to the report. Public universities in Iowa, New Jersey, and Ohio also have state-funded employee ownership centers that host events and offer technical assistance to small businesses interested in ESOPs.

“Employee Stock Ownership Plans transform workers into stakeholders,” assistant secretary of labor for employee benefits security, Daniel Aronowitz, said in a news release announcing the report. “I am proud of the work being done by the Department of Labor, as well as a growing number of states and community stakeholders, to make employee ownership an option for more American workers.”

Business executives from a coalition called Expanding ESOPs have encouraged the benefit in recent years as well, HR Brew reported previously. Companies including grocery chain Publix and furniture maker Room & Board have ESOPs, according to Bloomberg.

“There’s this mindset of long term here,” Emily McGarvey, Room & Board’s director of sustainability, told Bloomberg of the company’s 2017 pivot to an ESOP. “Sustainability is all about durability and thinking about the long term versus what you need to accomplish next quarter. An ESOP is just continuing that long-term mentality.”