stock purchase plan

Definition

A trust established by a corporate which acts as a tax-qualified, defined contribution plan by making the corporation's employees partial owners. contributions are made by the sponsoring employer, and can grow tax-deferred, just as with an IRA or 401(k) plan. But unlike other retirement plans, the contributions must be invested in the company's stock. The benefits for the company include increased cash flow, tax savings, and increased productivity from highly motivated workers. The main benefit for the employees is the ability to share in the company's success. Due to the tax benefits, the administration of stock purchase plans is regulated, and numerous restrictions apply. also called Employee Stock Ownership Plan (ESOP).

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