PLANSPONSOR - December 2022-February 2023 - 36
OPINION
Employee-Owned
ESOPs can up the assets of working Americans, and benefit the company
A
ccording to research from the
National Center for Employee
Ownership, employee stock
ownership plan participants
are better
off than 401(k) plan participants at nonESOP
companies. An ESOP can serve as
a retention tool for businesses, as well as
a cushion for the workers, enabling them
to be more financially resilient in a crisis.
Judy Faust Hartnett, managing editor
of PLANSPONSOR, spoke with NCEO
founder and senior staff member Corey
Rosen about the current state of ESOPs.
PLANSPONSOR: What are employee stock
ownership plans?
COREY ROSEN: There are many ways to
share company ownership broadly with
employees; people most often think of
restricted stock, stock options or stock
purchase plans, which are common in
tech and public companies.
By far the most tax-favored way of
sharing ownership is through an ESOP.
That's a tax-qualified defined contribution
retirement plan regulated under the
Employee Retirement Income Security Act
and the Internal Revenue Code. Around
6,500 U.S. companies sponsor an ESOP,
and approximately 14 million U.S. workers
are ESOP participants. The company sets
up a trust designed to invest primarily in
the stock of the employer. It's important
to note that these plans are funded by the
employer, not the employee buying shares.
What happens is that a company will
purchase shares out of future tax-deductible
dollars, to contribute to the plan.
Then the plan will allocate these shares
to employees using rules similar to those
36 PLANSPONSOR.COM December 2022 - February 2023 Art by Andrea D'Aquino
of other ERISA plans. ESOP participants
accrue shares in the plan, over time, and
are paid out by having their shares bought
back after they leave the company.
I think it's useful to distinguish
between the plans' applications in private
and public companies. In public companies,
they are used overwhelmingly in
conjunction with the company's 401(k)
plan. So the ESOP might be the match
to the plan. The primary use of ESOPs
in private companies is to purchase the
company from existing owners.
An owner of a closely held company
might say, " Well, I could sell to private
equity or a competitor, or I could liquidate. "
But those options have disadvantages-in
particular, disadvantages for the
legacy of the company the owners built.
Some of the people who've helped build
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PLANSPONSOR - December 2022-February 2023
Table of Contents for the Digital Edition of PLANSPONSOR - December 2022-February 2023
INSIGHTS
RULES & REGULATIONS
PARTICIPANT ANALYSIS
UPFRONT
Risk Protection
Benchmarking Beyond Fees
Exploring ESG Investing
In Case of Emergency
Employee-Owned
FIDUCIARY FORUM
INSIDE ANGLE
PLAN PROFILE
PLANSPONSOR - December 2022-February 2023 - Cover1
PLANSPONSOR - December 2022-February 2023 - Cover2
PLANSPONSOR - December 2022-February 2023 - 1
PLANSPONSOR - December 2022-February 2023 - INSIGHTS
PLANSPONSOR - December 2022-February 2023 - 3
PLANSPONSOR - December 2022-February 2023 - RULES & REGULATIONS
PLANSPONSOR - December 2022-February 2023 - 5
PLANSPONSOR - December 2022-February 2023 - 6
PLANSPONSOR - December 2022-February 2023 - PARTICIPANT ANALYSIS
PLANSPONSOR - December 2022-February 2023 - UPFRONT
PLANSPONSOR - December 2022-February 2023 - 9
PLANSPONSOR - December 2022-February 2023 - 10
PLANSPONSOR - December 2022-February 2023 - 11
PLANSPONSOR - December 2022-February 2023 - 12
PLANSPONSOR - December 2022-February 2023 - 13
PLANSPONSOR - December 2022-February 2023 - Risk Protection
PLANSPONSOR - December 2022-February 2023 - 15
PLANSPONSOR - December 2022-February 2023 - 16
PLANSPONSOR - December 2022-February 2023 - 17
PLANSPONSOR - December 2022-February 2023 - Benchmarking Beyond Fees
PLANSPONSOR - December 2022-February 2023 - 19
PLANSPONSOR - December 2022-February 2023 - 20
PLANSPONSOR - December 2022-February 2023 - 21
PLANSPONSOR - December 2022-February 2023 - 22
PLANSPONSOR - December 2022-February 2023 - 23
PLANSPONSOR - December 2022-February 2023 - 24
PLANSPONSOR - December 2022-February 2023 - 25
PLANSPONSOR - December 2022-February 2023 - 26
PLANSPONSOR - December 2022-February 2023 - 27
PLANSPONSOR - December 2022-February 2023 - Exploring ESG Investing
PLANSPONSOR - December 2022-February 2023 - 29
PLANSPONSOR - December 2022-February 2023 - 30
PLANSPONSOR - December 2022-February 2023 - 31
PLANSPONSOR - December 2022-February 2023 - 32
PLANSPONSOR - December 2022-February 2023 - 33
PLANSPONSOR - December 2022-February 2023 - In Case of Emergency
PLANSPONSOR - December 2022-February 2023 - 35
PLANSPONSOR - December 2022-February 2023 - Employee-Owned
PLANSPONSOR - December 2022-February 2023 - 37
PLANSPONSOR - December 2022-February 2023 - FIDUCIARY FORUM
PLANSPONSOR - December 2022-February 2023 - INSIDE ANGLE
PLANSPONSOR - December 2022-February 2023 - PLAN PROFILE
PLANSPONSOR - December 2022-February 2023 - Cover3
PLANSPONSOR - December 2022-February 2023 - Cover4
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