What is an ESOP?

An Employee Stock Ownership Plan (ESOP) is:
• A Tax Qualified Defined Contribution Employee Retirement Plan
• Qualifies under IRC Section 401(a) & Section 501(a)
• Overseen by the I.R.S and the Department of Labor
• Formalized in ERISA 1974

An ESOP is an employee benefit plan, in which the employees of a company become owners of stock in that company. Compared to other employee benefit plans, there are several features that make ESOPs unique.

First, only an ESOP is required by law to invest primarily in the securities of the sponsoring employer. Second, an ESOP is unique among qualified employee benefit plans in its ability to borrow money. As a result, "leveraged ESOPs" may be used as a technique of corporate finance.


Employee Stock Ownership Plans – ESOPS

• Modern ESOPs Came into being with passage of ERISA-1974
• There are currently over12,000 ESOP Companies in the United States.
• Currently over $400 Billion Dollars in Assets
• ESOPs can be any size company and include: UPS, Wal-Mart, Lowes, AVIS, Charles Schwab, WINCO, Morgan Stanley, and Southwest Airlines.