1
Plan Establishment
The company establishes an ESOP trust and contributes shares of company stock — or borrows funds to purchase shares on behalf of employees.
Welcome to Our ESOP
Employee Stock Ownership Plan — Building Wealth Together
As an employee-owner, you share in the company's success.
Learn MoreUnderstanding the Basics
What Is an ESOP?
An Employee Stock Ownership Plan (ESOP) is a qualified wealth building benefit plan that invests primarily in the stock of your employer. The company sets up a trust fund and contributes shares of company stock — or cash to purchase shares — into it. These shares are then allocated to individual employee accounts, giving you a real ownership stake in the company you help build every day.
Federally Regulated
ESOPs are governed by ERISA and the Internal Revenue Code, ensuring strong employee protections.
Tax-Deductible for the Company
Contributions to the ESOP are tax-deductible for the company, incentivizing generous plan funding.
Tax-Deferred for You
Employees pay no taxes on their share allocation until they receive a distribution from the plan.
Aligned Interests
ESOPs align employee interests with company performance — when the company thrives, so do you.
Company Contributes
Shares Allocated to You
You Build Wealth
The Process
How Your ESOP Works
2
Share Allocation
Shares are allocated to your individual ESOP account each year, typically based on your eligible compensation or years of service.
3
Vesting
Your ESOP account vests over time according to the plan's vesting schedule. Once vested, you own those shares and their associated value.
4
Distribution
When you retire, leave the company, or reach a qualifying triggering event, you receive the value of your vested shares in cash or stock.
Your Ownership Timeline
Your Vesting Schedule
Vesting means earning the right to receive your ESOP benefits over time. With a graded vesting schedule, you earn an increasing percentage of your shares each year until you are fully vested. Below is Synergy's vesting schedule.
Year 1
0%
Year 2
20%
Year 3
40%
Year 4
60%
Year 5
100%
Financial Advantages
Powerful Tax Benefits
Tax-Deferred Growth
Your ESOP shares grow tax-deferred until you receive a distribution. You don't pay any taxes on your ESOP account balance while you remain employed with the company — allowing your wealth to compound over time.
No Out-of-Pocket Cost
The company funds the ESOP entirely on your behalf. You receive shares of company stock without contributing any of your own money — it's a company-paid retirement benefit that adds to your total compensation.
Employee Protections
Your Rights as an Owner
Annual Account Statements
Right to receive annual statements showing your account balance, shares allocated, and vesting status.
Voting Rights
Right to vote your allocated shares on major corporate matters such as mergers, acquisitions, and dissolutions.
Diversification Rights
Right to diversify your account after reaching age 55 with 10 or more years of ESOP participation.
Distribution Options
Right to receive your distribution in a lump sum or in substantially equal installments over up to five years.
Rollover Eligibility
Right to roll over your ESOP distribution to an IRA or another qualified retirement plan to continue tax-deferred growth.
Access to Plan Documents
Right to review the Summary Plan Description (SPD), annual reports, and other plan documents upon request.
Planning Ahead
When You Receive Your Benefits
Retirement
At age 65 or your plan's normal retirement age, you become eligible for a full distribution of your vested shares.
Death or Disability
In the event of death or disability, your vested account is distributed to you or your designated beneficiary.
Separation from Service
If you leave the company for any reason, your vested shares will be distributed according to the plan's distribution rules.
Distribution Timing Rules
Retirement, Death, or Disability
Distribution must begin no later than one year after the close of the plan year in which the triggering event occurs.
Separation from Service (Other Reasons)
Distribution must begin no later than the sixth plan year following the plan year in which the participant separates from service.
Rollover Option
You may roll over your ESOP distribution to an Individual Retirement Account (IRA) or another qualified retirement plan to continue tax-deferred growth.
!
Important: Distributions received before age 59½ may be subject to a 10% early withdrawal penalty in addition to ordinary income tax, unless a qualifying exception applies. Consult your tax advisor.
Common Questions
Frequently Asked Questions
Shares are typically allocated based on your eligible compensation as a percentage of total eligible compensation for all ESOP participants. For example, if your compensation represents 2% of total eligible payroll, you would receive approximately 2% of the shares allocated that year. Some plans may also factor in years of service.
No. The ESOP is funded entirely by the company. You receive shares of company stock as a company-paid benefit at no cost to you. This is different from a 401(k), where you typically make your own contributions from your paycheck.
Your ESOP account value is tied directly to the value of the company's stock. If the stock value decreases, your account balance will decrease as well. However, if the stock value increases, so does your balance. The diversification options available after age 55 with 10 years of participation help you manage risk as you approach retirement.
A 401(k) is funded primarily by employee contributions (often with an employer match), and employees choose from a menu of investment options. An ESOP is funded entirely by the company and invests primarily in company stock. Both are qualified retirement plans, but they work differently. Many companies offer both an ESOP and a 401(k) as complementary retirement benefits.
Federal law requires that ESOP participants who have reached age 55 and completed at least 10 years of participation be allowed to diversify up to 25% of their account balance into other investments. At age 60, this increases to 50%. This is designed to help you reduce concentration risk as you approach retirement.
If you leave the company before you are fully vested, you forfeit the unvested portion of your ESOP account. Only your vested shares will be distributed to you upon separation from service. Forfeited shares are typically reallocated to remaining ESOP participants. This is why understanding your vesting schedule is important.
Get Started
Next Steps & Resources
Review Your SPD
Read your Summary Plan Description (located in the HR folder on Synergy Spirit) for complete details about eligibility, vesting, distributions, and all plan provisions.
Contact HR
Reach out to the Human Resources or Finance department with any questions about your ESOP benefits.
Check Your Statement
Log in to your ESOPConnection portal to view your current account balance, share allocation, and vesting status.