An Employee Stock Ownership Plan (ESOP) is a type of employee benefit plan that acquires company stock and holds it in accounts for employees. Learn more about how an ESOP works in our video.
An ESOP is a qualified retirement plan. This means that contributions are made by an employer who deducts those contributions and those contributions are allocated to the accounts of participants. Then as participants provide service under the plan, they vest in those accounts, typically over a six year period. Once they reach normal retirement age or they die, are disabled or terminate employment, they’re entitled to a distribution. Most often those distributions are paid out of the plan and rolled into an IRA.