AESOP

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Related to ESOP: employee stock ownership plan, Aesop, Æsop

AESOP

Abbreviation for:
Automated Endoscopic System for Optimal Positioning
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The benefits of an ESOP do not come without some potential costs to its participants, some affecting employees and some affecting the firm and its value.
In 1975, just one year after ESOPs were made part of Congress Employee Retirement Income Security Act, there were approximately 1,500 ESOPs covering about 250,000 employees, according to the National Center for Employee Ownership (NCEO) reports.
An ESOP can create a market for the shares of your company where one might not already exist, or when the outside market may not be palatable to the current shareholders.
According to Corey Rosen, cofounder and senior staff member of the National Center for Employee Ownership, S Corporation ESOP balances were three to five times higher, on average, than 401(k) plans.
Some people will be concerned that an ESOP gives employees voting control of the company.
An ESOP is a tax-qualified defined contribution employee benefit program intended to primarily invest in the stock of the plan sponsor company.
There are many conditions that must be met, including that the ESOP company must be a C corporation, the ESOP must end up owning at least 30 percent of the company, and the seller must invest the proceeds of the sale in qualifying public stock or debt securities.
With an ESOP, you never buy or hold the stock directly.
When employees retire or otherwise qualify for distributions from the plan, they receive the vested portions of their ESOP accounts in stock or cash.
The repayments the ESOP makes to the bank are tax-deductible, as is the cash the business owner receives from the ESOP (if rolled over into a qualified investment.
Mutual funds are strongly encouraged to make ESOP loans under the rules of the Tax Reform Act of 1986, which permits the creation of dual-purpose funds.
When questioned on the challenges faced by ESOP management, Lowell stated, "Getting the employee owners to understand that they don't really run the company, but they can voice their opinions, was a challenge at first.