On September 2, 1974 President Gerald Ford signed the Employee Retirement Income Security Act (ERISA) into law. This landmark bill included provisions creating Employee Stock Ownership Plans (ESOPs). ESOPs have allowed millions of American workers to experience the benefits of company ownership.
Harness the power
ESOPs weren’t the only famous invention in 1974. The brightly colored Hasbro® Rubik’s Cube was also introduced. People spent countless hours twisting and turning trying to solve the puzzle. They found that the toy allowed almost limitless flexibility (and frustration for many).
The Rubik’s Cube and an ESOP have some similarities (frustration not being one of them). Just as the cube has a large number of possible combinations, so does an ESOP. An ESOP is a flexible tool that allows an employer to plan for their succession, diversify their holdings, or assist their employees as they prepare for retirement.
The plan can be designed to meet the needs of the business owner, the company, and the employees. An ESOP allows the owner flexibility in the timing and extent of exit. The ESOP gives them the flexibility to continue to operate the business. ESOP consultants can assist the business owner in getting all the right colors, on the right sides, at the right time.
Plan your next move
3M Post-It Notes® were also invented in 1974 (I know it is hard to imagine that they haven’t been around forever). In stark contrast to the Rubik’s Cube, Post-It Notes were anything but colorful and flashy.In fact, they initially only came in yellow, 3 inch squares . But, they were incredibly useful and soon found themselves to be indispensable in most offices.
Many business owners find ESOPs to be equally useful. They allow the company to create a buyer for the business. They allow an owner to receive fair market value for their stock. They provide the owner great control over the sales process.
1974 was a very good year. Rubik’s Cubes, Post-It Notes, and ESOPs have all weathered the test of time. Is it time for you to look at an ESOP for your company?
In addition to blogging here, I also tweet regularly about topics of interest to ESOPs. Click to follow me on Twitter- @jlripperger .
No investment strategy, such as asset allocation or diversification, can guarantee a profit or protect against loss in periods of declining values. Company stock is not a pooled investment. Stock may experience greater volatility and should not be directly compared to investment options that have a more diversified investment mix. It is not intended to serve as a complete investment program by itself.
Insurance products and plan administrative services are provided by Principal Life Insurance Company a member of the Principal Financial Group® (The Principal®), Des Moines, IA 50392.