An Employee Stock Ownership Plan (better known as an ESOP) is a tax–qualified, defined contribution plan regulated under ERISA and the Internal Revenue Code. The basics of an ESOP are that employees purchase shares in the company or are given shares as compensation. When an employee retirees or has another qualifying event, the shares are turned (presumably at a profit) and the employee can retire and pay his cost-of-living expenses from the earnings and value of selling the shares back. The reasons why ESOPs are created and utilized are broad in range (e.g. provide the original owners an avenue to sell company stock to trusted employees, motivate employees, preferred lending, tax savings, and even raise capital for company expansion). However, sometimes companies and plan sponsors do not give employees their fair market value when they try to sell their shares back. When this happens, the company and plan sponsors may be in violation of their fiduciary duties under ERISA. If you feel you are not being offered the fair market value of your ESOP shares, please email Feldman Fox & Morgado here. |
