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)

For testing purposes, can contributions to another plan be used to offset contributions to an ESOP? For instance, can the fact that an employee is getting contributions under a separate profit sharing plan offset the requirement that the employee get a non-discriminatory contribution to the ESOP?

No. ESOP allocations generally cannot be offset by contributions to other plans. There is one exception:

1. Both plans were in effect November 1, 1977,

2. Both plans are ESOPs and the proportion of qualifying employer securities to total plan assets is substantially the same for both plans,

3. The plans each hold the same class of stock, and

4. If there is more than one class of stock held in the plans, the ratio of each class in each plan is substantially the same.

Link to this FAQ Topic: ESOP Plan Design & Participation