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)

What does the ESOP administrative committee typically do?

ESOP administrative committees can have several responsibilities. They may be responsible for plan design, including recommending amendments to the plan to the board. In some cases, this could involve fiduciary issues, such as changing the plan in a way that reduces promised benefits to participants beyond what specific ESOP exceptions to ERISA allow. They can also make fiduciary decisions for the plan directly or by directing the trustee of the plan to make the decision. Alternatively, they can just have an advisory role to the fiduciaries. They often assume responsibility for administrative oversight of the plan (making sure that statements go out, that participants are paid, that allocations are properly made, etc.), although they rarely actually do the administration. Finally, they often act as the vehicle for communicating the plan to participants and even overseeing the company's employee involvement program, although many companies choose to have the communications and involvement functions performed by a separate committee.

Link to this FAQ Topic: Governance, Fiduciaries & Compliance