Employee Stock Ownership Plan

Employee Stock Ownership Plan

An ESOP, or Employee Stock Ownership Plan, allows employees to become owners of the stock in the company they work. It is a retirement plan designed to benefit not just the employees but the business as a whole. ESOPs can provide substantive retirement and develop transformational productivity through shared ownership. ESOPs are a qualified, defined contribution plan similar to a 401k plan. Both allow for earnings and the value to grow tax free and become taxable upon withdrawal from the plan. Unlike a 401k plan, generally the only investment in the ESOP is the stock of the plan sponsor.

People often confuse ESOPs with Stock Option Plans. They are quite different. A stock option plan gives selected individuals the right, or the option, to buy stock at a specified amount with their own funds at a later date. ESOPs are designed for the broader employee base of the company. Employees rarely purchase stock through an ESOP. Instead the company makes contributions on their behalf for their labor efforts to the organization. That contribution can be in stock, or can be in cash to purchase stock. Going a step further, ESOPs are the only retirement plan in the US that can borrow money to buy stock. As those loan payments come due, the company will contribute sufficient money to repay the loan. As each repayment is made, shares are allocated to plan participants. This is similar to the way one buys a home with a mortgage and pays that mortgage off over time.

Here at TI-TRUST, we are a nationally recognized provider of ESOP trustee services. Let’s discuss the benefits we’ve witnessed in serving our ESOP clients since 1989.

Vested Employees

Every share that employees own is their piece of the company. When the company succeeds, that profit increases the value of the company, which in turn increases the value of the retirement benefit. In our experience, we have noted ESOP company employee-owners are loyal, productive and fiscally invested in the company. They care about the company, its future and the future of its employees. An ESOP is an attractive and unique competitive edge to entice top-tier talent, all while retaining a lower turnover rate.

Upon termination of employment, employees will receive either cash for the value of their shares, or in certain situations, the stock itself to be sold back to the company at a later date. Each ESOP contribution is an investment in the employees and the company. The peace of mind provided by labor and their earned shares will be invaluable.

Your ESOP Trustee

ESOPs are directed by the Employee Retirement Income Security Act, or ERISA for short. Over the years, Congress has passed laws to encourage companies to consider ownership with an ESOP. We are proud of our 30+ year service as trustee to ESOPs all over the country. Our dedicated group of employee benefit officers and staff have more than 200 years of combined ESOP experiences. We welcome the opportunity to chat with you and answer any further questions you may have.


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