ESOP News March-April 2018

What’s the Difference between ESOPs and 401(k) Plans? 

Many of us have either participated or at least heard of 401(k) plans and are more familiar with them than an ESOP. To know a 401(k) plan, though, is a great way to understand how an ESOP works. Both have a lot in common, with a few key differences and both can be important building blocks in your retirement planning.

Overall, ESOPs and 401(k) plans have a lot in common, and both can be excellent tools to provide for your future financial security. In addition to statements you receive, you can go to at any time to see the current value of both your ESOP and 401(k) retirement accounts.

Eligibility is the same 

Both the 401(k) and ESOP are employee benefits provided by the company. All employees that work at least 1,000 hours each year are eligible to participate after completing one year of service. Eligible participants enter on April 1 or October 1, whichever date follows your anniversary date.

Contributions are made differently 

  • In the 401(k), you make personal contributions to your account and FBG matches that contribution, up to 4% of your annual earnings. Your contribution is held in your 401(k) account and the “match” is held inside your ESOP account.
  • In the ESOP, FBG provides 100% of all contributions to your ESOP account.

Investment options are different 

  • In the 401(k), you direct where you want your money invested by choosing from options provided within our plan.
  • In the ESOP, all dollars in your account are invested in FBG.

Legal similarities 

  • Both plans fall under the same federal law, the Employee Retirement Income Security Act (ERISA).
  • Both are controlled by a trustee who is responsible for protecting the value of the participants’ accounts.
  • Both types of plans are intended to be used at retirement.

Questions about the FBG ESOP? Contact your supervisor.