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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 Utah, 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 an ESOP, which include the creation of a trust to hold the company's stock, rules for allocating stock to employees' accounts, and the vesting schedule. The ESOP must be designed to benefit the employees and must be non-discriminatory in its structure and operation. Contributions to the ESOP are tax-deductible for the employer, and employees pay no tax on the contributions until they receive the stock upon leaving or retiring from the company. It's important to distinguish ESOPs from employee stock option plans, which are compensation programs that give employees the right to purchase company stock at a future date at a predetermined price, not a retirement plan.

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