Learn the ways stock can be allocated with an ESOP in our video.
Transcript
Most often stock is allocated with an ESOP and proportioned to the compensation of the employees that are in the plan. It’s also possible, however, to design a formula in an ESOP that allocates stock in rate groups meaning groups of employees perhaps by job classification with those allocations fitting within the average benefits percentage tests which is found in the regulations. Finally, dividends that are paid on ESOP stock and that are used to make payments on a loan and release shares can be allocated either in proportion to compensation or according to the stock account balance within the plan. Whether you allocate dividends by compensation or by stock balance will depend on plan design and how you want to concentrate stock within the plan.
