Legal Definitions - employee-stock-ownership plan

An employee-stock-ownership plan is a type of employee benefit plan that is written to provide various benefits to employees, officers, and advisers of a company. This plan can include stock-purchase, savings, option, bonus, stock-appreciation, profit-sharing, thrift, incentive, pension, or similar plans. It is solely for the benefit of employees and excludes any plan, fund, or program in which no employees are plan participants.

One example of an employee-stock-ownership plan is an ESOP (Employee Stock Ownership Plan), which invests primarily in the employer's stock. This plan receives special tax benefits and can borrow money to fund employee stock purchases, making it a useful corporate finance tool.

Another example is a 401(k) plan, which is a retirement and savings plan that allows an employee to elect to have a portion of their pretax salary contributed to a defined contribution plan. Employers often match all or part of the employee's contributions, and employees can choose investments from a list of options.

These examples illustrate how an employee-stock-ownership plan can provide various benefits to employees, such as retirement savings and stock ownership in the company they work for. These plans can also be beneficial for employers as they can help attract and retain talented employees and provide a useful tool for corporate finance.