How Does an Employee Stock Ownership Plan, or ESOP, Work?

Here's what an employee needs to know about how they can benefit from the growth of their company through these plans, as well as info on accumulation, vesting and distribution.

Three smiling employees walk side by side through an office.
(Image credit: Getty Images)

Editor’s note: This is part two of a six-part series in which Peter Newman, CFA, of Peak Wealth Planning, explains the benefits of employee ownership for the U.S. workforce. There are more than 6,500 Employee Stock Ownership Plans, or ESOPs, in the U.S. covering almost 14 million employees. Part one is Five Key Advantages to Working at an Employee-Owned Company. Part three is Five Things Employee-Owners Need to Know About Their ESOP.

Employee Stock Ownership Plans (ESOPs) offer a unique opportunity for employees to participate in the growth and success of the companies they work for. These plans provide employees with a means of accumulating wealth and building a retirement nest egg.

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Peter Newman, CFA
President, Peak Wealth Planning, LLC

Peter Newman founded Peak Wealth Planning, LLC in 2014 to provide financial planning and investment management for individuals who built their wealth through ESOP participation, business ownership or real estate investing. He helps families diversify their concentrated stock, reduce estate taxes, preserve wealth and generate stable retirement income. Peter holds the Chartered Financial Analyst designation, considered by many to be the gold standard for investment management.