What Is an ESOP?
An Employee Stock Ownership Plan (ESOP) is a qualified retirement plan which holds either all or part of the ownership of a company (through shares of common stock) in an “ESOP Trust” that is separate from the sponsoring company.
The shares of common stock in the ESOP Trust are allocated to employee accounts, thereby making the employees “owners” of the company through the ESOP Trust. The value of the stock is tied to company performance.
ESOPs are legislated plans authorized as part of the Employee Retirement Income Security Act (ERISA) of 1974 and governed by regulations issued by the Department of Labor (DOL) and the Internal Revenue Service (IRS).
ESOPs usually are implemented in closely held companies when an owner desires to share ownership in the company with the employees.
The TWD ESOP – A Tangible Employee Benefit
When TWD founder, Mr. Allan Algoso, created the TWD ESOP in 2000, he established a mechanism to share the benefits of the company’s success with those who helped create it – our employees.
In 2003, the employees purchased a controlling interest in TWD from Mr. Algoso. They used the ESOP to finance the purchase with tax benefits to the seller and to the company.
The TWD ESOP provides very real and tangible benefits to our employees. Today, employee ownership is part of a larger commitment to the TWD ownership culture, which promotes inclusiveness and the sharing of common goals among TWD employees at all levels – and in all areas.
Good for the Company, Good for the Employee
The establishment of the TWD ESOP provides the company itself with many benefits, including favorable tax considerations. In addition, by sharing the ownership of the company with its employees (versus another entity), TWD retains its autonomy and management, and its focus on delivering its trademark exceptional support and services to its customers.
The TWD ESOP provides our employees with a ground-floor opportunity to earn a stake in TWD, delivers shares of company stock at no cost to the employee, and offers employees a viable retirement instrument at no cost. Since employees’ productivity, attitude, and efforts contribute directly to the value of the company, their hard work results in a tangible reward – the increased value of their stock.
Shares of stock are made available through TWD contributions of cash or stock to the ESOP Trust. Additional shares are available for allocation to employees from share repurchases and forfeitures from departed employees. As the value of TWD increases, the price of the ESOP shares of stock increases.
In the case of the TWD, ESOP governance is provided by a Board of Trustees, which is appointed by the TWD Board of Directors. Members of an employee committee take the lead in educating and updating employees on company performance and benefits. News and information about the company and the ESOP are provided throughout the year via our quarterly newsletter, our SharePoint portal, town hall-style gatherings, and social events during October which is recognized as National Employee Ownership Month.