One of our Senior Managing Director and CPAs, Marcus R. Piquet, gives a presentation on ESOPs and their rising popularity.
In this video, Marcus explains why Employee Stock Ownership Plans (ESOPs) are more popular than ever and why interest has surged since the early 2010s. He highlights several converging factors driving ESOP growth, including the retirement of baby boomer business owners, strong and rising business valuations, historically high capital gains tax rates, and favorable lending conditions. Marcus notes that ESOP transaction volume has increased significantly as owners seek tax-efficient exit strategies and long-term succession solutions.
Marcus provides a clear overview of what an ESOP is and how it works, explaining that an ESOP is an ERISA-governed defined contribution plan under Section 401(a) of the Internal Revenue Code, similar in structure to a 401(k) or profit-sharing plan. Unlike other retirement plans, ESOPs are designed to invest primarily in employer securities, giving employees a direct ownership stake in the company. When company stock is not publicly traded, it must be independently valued annually, and employees are guaranteed liquidity through a required put option at retirement.
He also emphasizes one of the most distinctive features of ESOPs: their ability to borrow money to acquire company stock from shareholders, the company, or a bank—transactions that would otherwise be prohibited under ERISA. Marcus concludes that this unique combination of tax advantages, financing flexibility, and employee ownership makes ESOPs a compelling solution for business owners seeking fair market value, continuity, and shared long-term success.