Employee stock ownership plan

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Employee stock ownership plan (ESOP)

A company contributes to a trust fund that buys stock on behalf of employees.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

Employee Stock Ownership Plan (ESOP)

A qualified retirement plan in which employees receive shares of the common stock of the company for which they work and the company receives an investment tax credit. The purpose of this type of plan is to give employees a vested interest in the company, thereby providing them with an additional incentive toward greater productivity. See also leveraged ESOP.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

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.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
Rob Schatz said, "With the rapidly increasing use of the employee stock ownership plan to facilitate the transfer of companies to their employees, it is important for corporate boards and ESOP trustees to understand the obligations that they owe to the employee owners of the business."
Employee stock ownership plans open the door to multiple opportunities for financial advisors.
In that case, participants in an employee stock ownership plan alleged that the plan fiduciaries breached their duties when they continued to invest in the employer's stock after the discovery of errors in the company's pricing of stock options and accounting deficiencies that led to a large drop in the stock price, resulting in the loss of hundreds of millions of dollars in retirement savings to employees and retirees.
Although employee stock ownership plans (ESOPs) have been in existence since 1974, they are still not widely understood to be an attractive option for many companies.
BLS: Bureau of Labor Statistics ESOP: Employee Stock Ownership Plan NCEO: National Center for Employee Ownership PAYSOPs: Payroll-based Stock Ownership Plan
Employee stock ownership plans added 865,000 employees to new and existing plans last year, according to an estimate by the National Center for Employee Ownership.
Glassman said, "I hope that this legislation will encourage the creation of Employee Stock Ownership Plans throughout Connecticut to benefit the Connecticut economy, the Connecticut business environment and, most importantly, the employees that work at these ESOP owned companies."
The number of employee stock ownership plans (ESOPs), as of the end of 2013, was 6,795, with 10.6 million active plan participants and $1.23 trillion in plan assets, according to an analysis by the National Center for Employee Ownership (NCEO), released in December 2015.
Employee Stock Ownership Plans (ESOPs) typically secure large blocks of life insurance on key executives and owners to protect the ESOP from a loss due to the premature death of a selling shareholder.
Technically, the first phase of this project addresses accounting for equity-based compensation transactions with employees other than employee stock ownership plans (ESOPs).
To qualify for nonrecognition treatment, transfers must meet the requirements of IRC section 1042, Sales of Stock to Employee Stock Ownership Plans or Certain Corporations.

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