PIZ Posted October 8, 2004 Share Posted October 8, 2004 Does anyone have experience with ESOPS? Someone told me we will get a check + compensation for the remaining number of years we have until retirement. Is this true. I'm 31, will I get compensated for the 34 years I have to work? I'm confused and my fellow employees are going crazy. Link to comment Share on other sites More sharing options...
Mike in Syracuse Posted October 8, 2004 Share Posted October 8, 2004 My company I work for is an ESOP. I'm not sure how your company sturctured it's corporate status but it's my understanding that there are number of different ways they can be set up. The main benefit of an ESOP structure is that it is a SUBSTANTIAL tax savings for the company as ESOP's are currently tax free. The drawback is that you return dividends to the employees that are exponentially larger than what you'd pay in taxes. In essence, and ESOP turns ownership of the company over to the employees. While it's not complete control, you get more input as to how the company is run. It's much like be a major stockholder in a corporation. Each year we have annual shareholders meeting and discuss the financial operations. We also get our annual stock certificates. The stocks value is established by an independent auditor and we've done very well. If your company is well managed and financially sound the ROI is 10-20 times that of our 401k. To answer your question, vesting times differ but once your fully vested you will get whatever your shares are worth. BUT, you have to leave or retire OR your company gets sold. The profits would then be shared among the employees. Unfortunately, once you get it, it becomes taxable income . So much depends on how your company is doing financially and that's the risk. Let me just say, I'm very happy with my return and at the current rate of growth, I may retire early Link to comment Share on other sites More sharing options...
PIZ Posted October 8, 2004 Author Share Posted October 8, 2004 To answer your question, vesting times differ but once your fully vested you will get whatever your shares are worth...hopefully. BUT, you have to leave or retire to get anything then it becomes taxable income . But my company (an ESOP) is going to sell the company. I will get the money for my shares then? Right now I'm 60% vested, which sucks. Link to comment Share on other sites More sharing options...
BuffaloBud Posted October 8, 2004 Share Posted October 8, 2004 Pull out your ESOP plan and read it. Are you a leveraged or non-leveraged ESOP? S-corp or C-corp? What is your eligibility? All this will have something to play into it. Check with your employee committee. They should know the plan and the provisions. Link to comment Share on other sites More sharing options...
stevestojan Posted October 8, 2004 Share Posted October 8, 2004 can't you ask your boss? Link to comment Share on other sites More sharing options...
Guest Stevetostoopid Posted October 8, 2004 Share Posted October 8, 2004 Can you ask your boss about the irony? Link to comment Share on other sites More sharing options...
aussiew Posted October 8, 2004 Share Posted October 8, 2004 If you're like me and don't understand all that terminology, just check with your Human Resources department. They will either have the answers or put you in touch with someone who will. Link to comment Share on other sites More sharing options...
KD in CA Posted October 8, 2004 Share Posted October 8, 2004 Pull out your ESOP plan and read it. Are you a leveraged or non-leveraged ESOP? S-corp or C-corp? What is your eligibility? All this will have something to play into it. Check with your employee committee. They should know the plan and the provisions. 61783[/snapback] The ESOP plans that I have managed work as such. You have money withheld from your paycheck over a period of time (i.e., six months), at the end of the six months, that money is converted into shares of company stock at the lower of the share price on one of two specific days (those days being the very first and very last day of the six month period), less a 15% discount -- there are various rules on pricing depending on the plan and its tax status. After that, you own the stock. Generally it's not going to be a very large amount, but it's real shares, just like you bough them on the open market. To answer your question, if your company is sold, usually your shares in the company will be converted over to shares in the acquiring company's stock (at some formula convertion price). Different types of mergers/acquitions could affect how this process works. If you are in the middle a purchase period, the money that has been coming out of payroll could either be refunded or could be used to purchase stock in the acquiring company. If your company is being bought and taken private, you will most likely be cashed out. Either way, the company is under legal obligation to notify you of how these issues will be handled. However, unless there has been a public announcement that your company is in fact being sold, no one is likely to give you any answers until it is official (that too being a legal requirement). As for the whole 'you'll get paid for 34 years', I think someone was confused Link to comment Share on other sites More sharing options...
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