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Qualified retirement plan

Invests primarily in the stock of the companies adopting and sponsoring them

Governed by ERISA and IRC and Regulated by DOL and IRS

Employees share in capital appreciation of the company

An ESOP is a qualified retirement plan empowered to invest primarily in the stock or other ownership of the employer and on behalf of the participating employees. The formation of an ESOP and the requirements of compliance are within the scope of ERISA and the Internal Revenue Service. The jurisdiction of the legal compliance falls within two different parts of the federal executive branch; these are two Department of labor and the IRS. THz objective of an ESOP is to give ownership to the employees in order to promote unity, increased effort, and loyalty of the company’s labor force in exchange for actual ownership of a trust that is formed to provide further benefits to the beneficiaries who are the employees.

There are roughly 6, 600 ESOP programs. There are currently fourteen (14) million participants who have this employee benefit. This provides the owner of the original company with an effort to liquidate an interest in the company while providing a further tool for succession planning and which provide continuity in the entity beyond the current owners’ active participation in the ordinary course of business of the entity. The majority of these, nearly ninety percent of the ESOPs are not in publically traded companies. Interestingly enough, since it is available to different types of entities, the majority are participating within S Corporations.

The participating crosses over into various types of companies. Nearly twenty-five percent are companies that manufacture produces and thirteen percent are in the construction arena. The balance are in the service areas, such as financial firms, insurance, real estate services as well as professional entities, technology companies, and those dealing in scientific research.

In light of the Covid pandemic, the areas with the opportunity for the greatest growth may be other service oriented industries, such as health care, food service and entertainment; including hotel management.

This vehicle could be an answer to resisting union involvement. It could also be an “olive branch” to these firms which wish to allow for organizing under collective bargaining, but would like to do so without antagonizing such effort.