An Employee Stock Ownership Plan is a qualified employee retirement plan designed to invest in stock of the company. An ESOP is a "qualified" plan, so it has to the regulations and requirements of the Internal Revenue Code of 1986 (IRC) and the Employee Retirement Income Security Act of 1974 (ERISA).
An ESOP (employee stock ownership plan) can be either qualified or non-qualified. Essentially each plan is funded with employer stock but beyond that there are differences.
A non-qualified ESOP is not subject to ERISA and they do not have the same tax favored benefits as a qualified ESOP. Non-qualified ESOPs have a risk of forfeiture and can be used in a golden handcuffs arrangement.
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A non-qualified ESOP is not subject to ERISA and they do not have the same tax favored benefits as a qualified ESOP. Non-qualified ESOPs have a risk of forfeiture and can be used in a golden handcuffs arrangement.