Employee Stock Ownership Plans and Company Stock

August Baker, Dennis E. Logue and Jack S. Rader

in Managing Pension and Retirement Plans

Published in print November 2004 | ISBN: 9780195165906
Published online July 2005 | e-ISBN: 9780199835508 | DOI:
 Employee Stock Ownership Plans and Company Stock

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Employee stock ownership plans (ESOPs) are a special form of defined contribution (DC) plan available to corporate sponsors in which the investments are not employee directed. There are essentially two types of ESOPs: ESOPs that borrow money to buy stock in the sponsoring employer, and ESOPs that do not borrow money. This chapter begins by describing ESOPs, then discusses the advantages and disadvantages of using company stock in a DC plan. It shows that the costs associated with using company stock are greater than many people realize — for plan participants and shareholders.

Keywords: employee stock ownership plans; defined contribution plans; pension plans; company stock

Chapter.  2916 words. 

Subjects: Financial Markets

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