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ARTICLE · 16 NOVEMBER 2011

Employer Stock Issues In Qualified Plans

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AN EMPLOYEE STOCK OWNERSHIP PLAN (ESOP) is a qualified defined contribution retirement plan, much like a profit-sharing or 401(k) plan.

United StatesEmployment and HR
Katten Muchin Rosenman LLP
Katten Muchin Rosenman LLP
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Published in The Practical Tax Lawyer

AN EMPLOYEE STOCK OWNERSHIP PLAN (ESOP) is a qualified defined contribution retirement plan, much like a profit-sharing or 401(k) plan. An ESOP, however, is designed to invest primarily in employer securities. The Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code of 1986 (Code), provide substantial tax incentives and planning opportunities for employers that sponsor ESOPs. Besides providing retirement benefits, ESOPs can address corporate finance and other business objectives, including resolving ownership succession issues; diversifying investments; planning their estates and charitable donations; borrowing funds to finance transactions or refinance debt; reducing or eliminating federal income tax; and increasing employee benefits and productivity incentives. ESOPs are attractive to employers for many reasons, but they have special characteristics and requirements that distinguish them from

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