What is an ESOP?
An ESOP or Employee Stock Ownership Plan is a type of employee benefit plan that allows employees to acquire ownership in the company they work for. Under an ESOP, a company sets up a trust fund and contributes shares of company stock (common shares) or cash to it (safe harbor). The trust holds these assets on behalf of the employees.
ESOPs are established as a long-term retirement benefit for employees. The company’s contributions to the ESOP are allocated among eligible employees based on factors such as their compensation or length of service. Over time, as the ESOP trust acquires more shares, the employees’ ownership stake in the company increases.
When employees leave the company or retire, they can sell their shares back to the company, providing them with a means to monetize their ownership.
When do I qualify for the ESOP?
Employees are eligible to participate in the ESOP after one full year of employment. Employees become invested in ESOP accounts as follows:
Years of Credited Service Non-Forfeitable Percentage
Less than Two Years 0%
Two Years 20%
Three Years 40%
Four Years 60%
Five Years 80%
Six Years or More 100%
- Companies we work with who are also ESOPs: Webcor Builders, Swinerton Builders, DPR Construction