An employee stock ownership plan (ESOP) is a retirement plan. When companies launch an ESOP, they form a trust that purchases some or all of the company’s shares and holds these in retirement accounts for employees. When the stock value increases or decreases, so does the value of employees’ accounts.
ESOPs provide a variety of significant tax benefits for companies and their owners. ESOP rules are designed to assure the plans benefit employees fairly and broadly.
Employee ownership can be accomplished in a variety of ways. Employees can buy stock directly, be given it as a bonus, can receive stock options, or obtain stock through a profit sharing plan. Some employees become owners through worker cooperatives where everyone has an equal vote.