What is an ESOP?
An employee stock ownership plan (ESOP) is an employee benefit plan that gives workers ownership interest in the company in the form of shares of stock. ESOPs encourage employees to give their all as the company's success translates into financial rewards. It is meant to supplement retirement. Similar to investing in a particular stock in the stock market, you are given shares at no cost to you.
When did Service Station Systems becme an ESOP
January 1, 2020
How are shares allocated
Shares are allocated based on W2 Income. More shares are released annually into the pool as the debt goes down.
Vesting is based on years of service. A participant that works a minimum of 1,000 hours during a plan year, is granted credit for a year of service.
Less than 2 year 0%
2 years, but less than 3 20%
3 years, but less than 4 40%
4 years, but less than 5 60%
5 years, but less than 6 80%
6 or more years 100%
When do I get my money?
If an employee leaves prior to retirement age, there is a wait period of six years and then the shares are paid out over 5 years. If more than $200 is paid out, it is subject to withholding tax and if you are under 59 ½, an additional 10% tax applies as well. You can delay the withholding and eliminate the 10% additional by rolling into an IRA. Balances under $5,000 are paid out automatically the year after you leave the company once the annual valuation and statements are completed.
If an employee leaves at or after retirement age, there is no wait 6 year wait period. Your shares will be paid over a 5 year period. If you balance is $5,000 or lower, you will be paid the year following when you leave the company, once the annual valuation and statements are completed.
When is retirement age?
Retirement age is 65 or 5 years of service, whatever is later. Example if you are 65 now and have been in the plan since 2020, you will need to wait three more years to be considered retirement age with 80% vested. After 6 years you would be 100% vested
Who is eligible
An employee Age 21 or older who completes 1000+ hours of service enters the ESOP 1/1 or 7/1. For example, if an employee is 21 and completes 1000 hours of service by July 1 (January to June) then they are enrolled on July 1 and will be qualified for allocation at the end of the year. If an employee completes the 1000 hours after July 1st then they would be enrolled on January 1 and would be qualified for the share allocation the following year.
Where can I get more information about ESOP Organizations?
Service Station Systems is a member of the below organizations which are great resources for obtaining more information about ESOPs. Please click on their respective logos to learn more.