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Chapter 15. Shopping at the Company Stor... > Employee Stock Ownership Plans - Pg. 150

Shopping at the Company Store 150 ESOPs are a way of giving employees some ownership in the company and providing for their retirement at the same time. Here's the reasoning behind this: If employees own stock in the com- pany, they feel motivated to work harder because not only are they getting a regular paycheck from the company, but they're going to benefit as the company grows and becomes more profitable. Terms to Know An ESOP (employee stock ownership plan) is a type of retirement plan in which employees are given stock in the company. Doing this gives the company various tax benefits. In 1981, the Congressional Record commented about ESOPs, "A strong case for expanded own- ership could be made on equitable grounds alone--or on motivational grounds alone. Certainly a nation that puts its faith in a private enterprise system should conduct its tax policy to ensure that the voting public has a personal stake in the system." Too bad those guys in Washington limited their thinking to just ESOPs. According to the IRS, an ESOP is a defined contribution plan, and it must be designed to invest primarily in "qualifying employer securities"--end of definition. An ESOP is primarily a retirement plan, and there are rules about what it can and cannot do if it wants to remain a qualified plan.