An employee stock ownership plan (ESOP) is a kind of employee benefit plan, similar in some ways to a profit-sharing plan. This is done by a company setting up a trust fund, into which it contributes new shares of its own stock or cash to buy existing shares. Alternatively, the ESOP can borrow money to buy new or existing shares, with the company making cash contributions to the plan to enable it to repay the loan. Regardless of how the plan acquires stock, company contributions to the trust are tax-deductible, within certain limits. When an employee retires, the ESOP pays retirement benefits either in cash or in employer stock, which the company must buy back from them at its fair market value if the retiree so desires. If your company stock is not readily marketable, your plan must give employees the option to sell the stock back to the plan or to your company at a fair price.
