An Introduction to Employee Stock Ownership Plans (ESOPs)

By Chris Engel, Krieg DeVault LLP

Employee Stock Ownership Plans (ESOPs) are stock bonus plans that (1) are designed to invest primarily in “qualifying employer securities” under the Employee Retirement Security Act of 1974 (“ERISA”) Section 407(d)(5) (29 U.S.C. § 1107(d)(5)) and (2) satisfy other specific requirements set out in ERISA and the Internal Revenue Code (the “Code”), including the tax-qualification requirements of Code Section 401(a). In setting up an ESOP, the employer company sets up a trust fund and either contributes new shares of the employer stock or cash to buy existing shares of the employer’s stock or alternatively the ESOP can borrow money to buy new or existing shares of the employer’s stock, with the employer making cash contributions to the plan for the plan to repay the loan.

Since the enactment of ERISA in 1974, ESOPs have become popular retirement vehicles for employers, with the most recent data stating that there are 6,669 plans in existence covering 14.4 million people.

As clients are looking for alternative business succession planning options, ESOPs are becoming more and more popular.  Please join the IndyBar Business Law Section August 29 for a presentation introducing the basics of ESOPs. This presentation will provide an entry-level, broad overview of ESOPs, including key concepts, structures and terminology, to allow you to properly advise your clients whether an ESOP may be the right opportunity to consider.

Business Law Skills Series: An Introduction to Employee Stock Ownership Plans (ESOPs) (1 General Credit)
Featuring Alexander L. Mounts, Krieg DeVault LLP
Wednesday, August 29, noon to 1 p.m. IndyBar Education Center
Register here.

If you would like to submit content or write an article for the Business Law Section, please email Kara Sikorski at ksikorski@indybar.org.