Which term refers to a tax-qualified benefit plan with defined contributions that allows employees to own shares in a company?

Which term refers to a tax-qualified benefit plan with defined contributions that allows employees to own shares in a company?

• A. Employee Stock Ownership Plan
• B. Employee Engagement
• C. Employee Turnover
• D. Employee Self-Service

Answer: (A)

An Employee Stock Ownership Plan is a tax-qualified, defined-contribution benefit plan that gives employees an ownership stake in the company through stock allocated to a trust for the employees. This structure is designed to align employees’ interests with the company’s performance, since the value of their shares can grow as the company grows. Because it’s tax-qualified, the employer often receives tax advantages for contributions, and employees typically defer taxes until distributions are made, with potential favorable treatment when they sell shares. This directly describes ownership in the company through stock, unlike the other terms listed, which refer to engagement, turnover, or self-service functionality rather than ownership or stock-based retirement benefits.

An Employee Stock Ownership Plan is a tax-qualified, defined-contribution benefit plan that gives employees an ownership stake in the company through stock allocated to a trust for the employees. This structure is designed to align employees’ interests with the company’s performance, since the value of their shares can grow as the company grows. Because it’s tax-qualified, the employer often receives tax advantages for contributions, and employees typically defer taxes until distributions are made, with potential favorable treatment when they sell shares. This directly describes ownership in the company through stock, unlike the other terms listed, which refer to engagement, turnover, or self-service functionality rather than ownership or stock-based retirement benefits.