History of ESOPs

The term “Employee Stock Ownership Plan” was first defined by Federal legislation in the Employee Retirement Income Security Act of 1974. Thus, in a sense, the ESOP is a relatively new form of plan which has existed only since September 2, 1974 when ERISA was enacted into law. Section 803(h) of the Tax Reform Act of 1976 made it clear that Congress intended for ESOPs to be used under ERISA as a technique of corporate finance. Thus their purpose of benefiting both employees and the Company has been clearly defined by Congress.

From 1974 to date, it has been estimated that 20,000 companies have installed Employee Stock Ownership Plans. The total number of employees currently covered by ESOPs is about 11,000,000. However, many ESOPs existed prior to 1974, even though such plans were not defined as such by Federal statute.

Although technically only in existence since 1974, the concept of Employee Stock Ownership Plans has been in the law since 1921 in the form of Stock Bonus Plans. Stock Bonus Plans, like Employee Stock Ownership Plans, are tax-exempt trusts which are designed to enable employees to own part or all of the company for which they work, without investing their own funds. The distinguishing feature of an ESOP is that an ESOP, unlike a Stock Bonus Plan, may engage in “leveraged” purchases of company stock. That is, an ESOP may acquire stock not only on a year-by-year basis, but also may borrow funds in order to purchase a block of stock.

History of Menke & Associates

Menke & Associates, Inc. was founded in 1974 by John Menke who co-authored the landmark ESOP legislation which subsequently spawned the industry. Today, the firm is one of the leading firms in the United States in structuring Employee Stock Ownership Plan transactions. The officers and associates of the firm bring more than 200 years of collective experience in structuring ESOP transactions. These officers and associates have participated in over 2,500 transactions.