Employee Stock Ownership Plan
What is an ESOP? An Employee Stock Ownership Plan (ESOP) is a defined contribution retirement plan established for employees to invest primarily in employer securities. The plan is regulated under several paragraphs of the Internal Revenue Service (IRS) Code.
The Dynetics ESOP
In 1989, Dynetics employees established the ESOP Trust to buy the controlling shares from our founders. Using the legal structure of a leveraged ESOP, the company received a loan from a local bank and secured the loan with shares of Dynetics stock purchased with the proceeds.
At the outset of the ESOP, all employees voted on the terms of the vesting period and chose the five-year schedule that we use today; employees must be in the plan for five years to receive full vesting.
Once the ESOP loan was paid off, all outstanding shares of Dynetics stock were allocated to participants’ accounts. The company chose to continue to contribute cash to the ESOP to aid in acquiring new companies.
In laying down a stable legal structure for ESOPs, Congress recognized the right of participants to vote their shares on issues of supreme importance to the company — mergers, bankruptcy reorganization, sellouts, etc. For all other issues, the law holds the Trustees accountable for voting the shares of the Trust.
We have instituted a defined contribution pension program in the ESOP that gives each eligible employee a stake in the company’s future. Future worth of the ESOP depends directly on our performance, which further underscores our commitment to excellence.