Q: What is an ESOP Employee Stock Ownership Program?  

An Employee Stock Ownership Program (ESOP) is a tax-exempt employee trust. Stock is placed into a trust for distribution to employees. Employees receive the stock when they retire or when employment terminates. The amount of stock an employee receives is based on employee pay and/or length of service. Employees may sell it back to the company or on the open market. The plan is considered leveraged when a company borrows money from a financial institution using its stock as a collateral for the loan. As the loan is repaid, stock is released from the financial institution into the employee trust. Normally, ESOPs have a vesting schedule based on length of employment.

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