All of the following are true about esops employee stock, Ask an Expert

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All of the following are true about ESOPs (employee stock ownership plans) except for one. Which of the following responses is incorrect?

An ESOP is an effective format to motivate employees and to create a market for closely-held shares.

In a leveraged ESOP the company makes their retirement contribution to a trustee who uses the funds to repay interest and principal on a loan; the loan is used to purchase shares of company stock.

ESOPs must satisfy ERISA rules regarding eligibility, participation, vesting and coverage (as relate to defined contribution plans)

The company gets a tax deduction for the amount of contribution used to repay interest on the loan, not on the portion of the contribution used to repay loan principal.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92401756

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