Frequently Asked Questions

Employee Ownership FAQs

Common questions about employee stock ownership plans (ESOPs), employee ownership trusts (EOTs), and other forms of employee ownership, from the basics to technical topics.

This FAQ is written primarily for business owners, managers, and advisors involved in setting up or running an employee ownership plan. If you're an employee at an ESOP company looking to understand your own benefits and rights, see our articles on Working at an ESOP Company and The Rights of ESOP Participants.

NCEO employee ownership FAQ hero (keyboard)

Can a company prepay an ESOP loan in excess of the Section 415 limits?

A company cannot make contributions in excess of the Section 415 limits, other than through dividends. Loan prepayments could be made from the company to the lender, but the internal loan from the company to the ESOP could not mirror this prepayment. There would rarely be any reason to repay an internal loan early.

Link to this FAQ Topic: Financing an ESOP