What is an ESOP?
ESOP stands for Employee Stock Ownership Plan. Van Horn Auto Group has elected to add an ESOP to the company. This means that Van Horn Auto Group is now an Employee Owned company!
Is it like a 401(k) or IRA?
An ESOP is a qualified retirement plan, similar to a 401(k) plan, that is designed to purchase company stock and provide employees with an ownership stake in the company.
How much does an ESOP cost an employee?
Unlike a 401(k), participation is free and a benefit of working for the company. The ESOP is 100% funded by the company. Employees share in the value of the company as beneficial owners.
How do employees participate in an ESOP?
Participating in the ESOP is a benefit of working for Van Horn Auto Group. Employees enter the plan on the first day of January or July following working 12 months and 1,000 hours, and attaining age18.
How do employees receive shares of stock each year?
Eligible ESOP participants receive shares of stock each calendar year they work 1,000 hours and are employed on the last day of the year. Participants that meet these requirements share in the annual allocations of contributions and forfeitures based on their eligible compensation for each plan year.
When are employees vested in the ESOP?
Employees earn a year of vested service for each plan year they work 1,000 hours. Starting with 2 years of vested service, participants attain an 20% of additional vesting up until year 6 when they will become 100% vested.
How does an employee account gain value?
Company stock accumulates in an employee's account each year as contributions are made to the plan by the company. Stock value increases each year based on the financial results of the company. The stock price is impacted by the employee's efforts and performance.
When does an ESOP account get paid out?
Five events can trigger a distribution from the ESOP – retirement, death, disability, termination (voluntary or involuntary), or diversification.
How is an ESOP account taxed?
Employees don’t pay taxes on their ESOP account balance until it is received by the employee. Balances can continue to be tax deferred if they are rolled over to an IRA or other retirement plan.