Employee Stock Ownership Plan (ESOP)

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This is a form of defined contribution benefit plan set up by your employer in which the contributions must be invested in the company's stock. This can be good if you work for a company that is successful and has stock that is appreciating because you will share in the company's success, but not so good if your company is not doing well and its stock is unattractive. The employer contributes to the fund, and the employee can also contribute, usually by payroll deductions. Any money the employee contributes is always his to take out should he leave the company, but any money contributed by the company can be taken out only if the employee has been working at the company sufficiently long so that he is vested in the employer's contributions. Such vesting may be full or partial, depending on the plan details and length of the employee's service at the company. See also Employee Stock Purchase Plan.