October is Employee Ownership Month! This month is a chance to celebrate all the benefits of being a part of an employee-owned company — one of these benefits being the Employee Stock Ownership Plan (ESOP).  While an ESOP is a retirement account, it’s not a 401(k). There are quite a few differences between the two that make being part of an employee-owned company so great. 

ESOP

An ESOP is a tax-exempt trust that is only offered through employee-owned companies. The biggest benefit of an ESOP is that employees do not invest their own money into it. Instead, contributions are made solely by the company. Company stock is purchased on behalf of team members and held in the ESOP. Being part of an ESOP is a unique opportunity with only 2% of healthcare companies having one!

401(k)

Like an ESOP, a 401(k) is a retirement account that employers offer. You don’t have to be part of an employee-owned company to open one. But, with a 401(k), contributions are automatically withdrawn from your paycheck and invested in funds of the employee’s choosing, often from a list of available offerings. Some companies may match the contributions their team members make to their 401(k), but that’s not always the case. This varies by company. 

While both an ESOP and a 401(k) are retirement plans, an ESOP allows team members to directly benefit from their organization’s growth and success at no cost to them. At MDP, we offer team members both a 401(k) and an ESOP and encourage team members to use a dual-retirement approach, which helps contribute to a culture of ownership!