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Employee Stock Ownership Plan

An employee benefit in which employees are issued or sold shares in the publicly-traded company for which they work after a certain number of days of employment. ESOPs are designed to give employees equity in the company to boost morale and thereby improve productivity. ESOPs receive various tax benefits, and may give employees a greater say in the election of the board of directors.


Employee stock ownership plan (ESOP).

An ESOP is a trust to which a company contributes shares of newly issued stock, shares the company has held in reserve, or the cash to buy shares on the open market.

The shares go into individual accounts set up for employees who meet the plan's eligibility requirements.

An ESOP may be part of a 401(k) plan or separate from it. If it's linked, an employer's matching contribution may be shares added to the ESOP account rather than cash added to an investment account.

If you're part of an ESOP and you leave your job, you have the right to sell your shares on the open market if your employer is a public company.

If it's a privately held company, you have the right to sell them back at fair market value. The vast majority of ESOPs are offered by privately held companies.


References in periodicals archive ?
Despite the positive attributes of an ESOP structure, the acquisition of a professional firm with an ESOP can be a risky purchase.
As a result, an ESOP can be an excellent tool for succession planning, both for liquidity and transition reasons.
The formation of an ESOP is a great time to review the existing life insurance of the selling owner and the company to determine if it is adequate given the new plan.
When an ESOP is established, the owner can choose to sell his equity stake and remain active in the company.
ESOPs have a vesting period during which they cannot be exercised.
Our ESOP consulting team will make sure to involve the advisor when there is a life insurance sales opportunity.
These arrangements entail giving the ESOP an option to purchase stock upon the stockholder's death.
This is true particularly where the ESOP company is an S corporation.
Johanson, Partner with Hawkins Parnell Thackston & Young LLP will speak at The Knowledge Group's webcast entitled: "Mastering the Fundamentals and Developments of ESOP Valuation.
An ESOP is a type of retirement plan that often is used as a vehicle for succession planning.