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An employee stock ownership plan (ESOP) is a retirement plan in which an employer contributes its stock to the plan for the benefit of the company’s employees. This type of plan should not be confused with employee stock option plans, which give employees the right to buy their company’s stock at a set price after a certain period of time.

In Arizona, as in other states, an Employee Stock Ownership Plan (ESOP) is a type of employee benefit plan designed to invest primarily in the stock of the sponsoring employer. ESOPs are governed by federal law, specifically the Employee Retirement Income Security Act (ERISA) of 1974, and the Internal Revenue Code. These laws set forth the requirements for establishing and operating an ESOP, including eligibility, vesting, distribution, and fiduciary responsibilities. The main purpose of an ESOP is to provide employees with an ownership interest in the company, aligning the interests of employees and shareholders, and potentially providing employees with an additional form of retirement savings. Unlike employee stock option plans, which provide the option to purchase stock at a future date at a predetermined price, ESOPs involve actual stock ownership, often without any purchase required by the employee. Arizona does not have specific state statutes governing ESOPs, as the federal regulations are comprehensive in this area.

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