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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 Minnesota, 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, which sets minimum standards for most voluntarily established retirement and health plans in private industry to provide protection for individuals in these plans. The Internal Revenue Service (IRS) also has regulations in place regarding the tax treatment of ESOPs, including tax deductions for the employer for contributions made to the ESOP. Minnesota does not have specific statutes governing ESOPs, as the regulation of these plans is primarily at the federal level. However, Minnesota businesses establishing an ESOP must comply with federal guidelines, and the benefits of the ESOP for both the employer and the employees are subject to federal tax rules. It's important for businesses to consult with an attorney and a tax advisor to ensure compliance with all relevant laws and to maximize the benefits of establishing an ESOP.

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