An ESOP, formally known as an Employee Stock Ownership Plan, is a tax-qualified retirement plan that invests primarily in the employer’s stock. The company sets aside stock in the ESOP to help employees prepare for retirement.
It means employees will be beneficial owners of the company at no cost, with equity in the company and retirement benefits. Non-management employees will not, however, participate in the management of the company, day-to-day decision making, and hiring and firing decisions. The ESOP does not guarantee employment at the company.
An ESOP is an effective tool for ownership succession-planning while also enabling employees to share in the company’s success.
There are two key differences between ESOPs and 401(k) plans. First, an ESOP invests primarily in an employer’s stock, while a 401(k) plan generally offers various mutual funds in which employees may invest funds. Second, 401(k) plans permit employees to contribute their own money into the plan, while ESOP contributions generally come solely from the company – making them completely free to employees.
The price of the stock in an ESOP is typically determined on an annual basis by a qualified valuation company working in conjunction with the plan’s trustee. These entities specialize in determining the value of ESOP-owned businesses. The value is based on many factors, including the company’s current and projected performance, the performance of similar publicly traded companies, the outlook for the industry, the geography within which the company operates, and the overall economic outlook.
Hoffman & Hoffman was founded by Harry & Louis Hoffman in 1947. Since 1947, the guiding values of the Hoffman Family of Companies have provided the backdrop for HVAC system design, building automation, and service for our customers. We believe in doing things right. We believe in business integrity, unparalleled service, and in providing dependable solutions for every project we touch. In 2016, the Hoffman Family of Companies became 100% employee-owned, and today, encompasses four companies serving the HVAC and building automation industries with offices in four states.