Employee Stock Ownership Plans (ESOPs)

Shared interest in your company’s future

As the number-one recordkeeper of Employee Stock Ownership Plans (ESOPs)1, the Principal Financial Group® (The Principal®) guides business owners in creating strategic plans that provide both retirement benefits and a shared stake in success.

ESOPs establish an employee-owned company and offer unique tax advantages, increased liquidity, and, often, greater employee satisfaction, motivation, and retention.

Call us at 800-952-3343 ext. 22681 to find out whether an ESOP is right for your business, or find an advisor near you to talk to a financial professional about your options.

Is an ESOP right for you?

To create an Employee Stock Ownership Plan, your company must:

  • Be a C or S corporation
  • Be a stable business with established clients and markets
  • Have a demonstrated history of strong, predictable profits and cash flows
  • Have an experienced management team
  • Have at least 30 employees, with high tenure and low turnover rates

An ESOP can also function as a business owner’s exit strategy, facilitating an efficient ownership transfer when he or she reaches retirement or otherwise leaves.

Here’s how it works.

After determining feasibility and establishing an ESOP advisory team, your company forms a trust and establishes the retirement plan. From there:

  1. Your company obtains financing and lends the proceeds to the ESOP trust to buy out all or a portion of owner shares.
  2. The company makes annual contributions to the trust to repay the loan.
  3. As the trust repays the loan, shares are allocated to employee accounts.
  4. Departing or retiring employees typically redeem their shares for cash.

Timing varies, but most ESOP setups take at least six to nine months. Our team can help you through the process. 

Do you offer employee benefits through us?
Manage your benefits online.
Need assistance with your benefits?
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Learn more about our retirement plans

Call us at 800-952-3343 ext. 22681 to discuss your options.
 

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1 Based on number of plans, PLANSPONSOR Recordkeeping Survey, June 2015