Compensation Glossary

Leveraged Employee Stock Ownership Plan (LESOP)

A qualified stock bonus plan or a qualified stock bonus and money purchase plan. Like a stock bonus plan, the contributions need not be dependent on profits, and benefits are distributable in the stock of the employer corporation. Typically, the ESOP is used as a financing vehicle for the employer corporation. The plan borrows money from the employer or uses the employer's credit, and purchases employer stock. The borrowed money is paid to the employer for its stock. The loan is repaid with annual employer contributions. See also Stock Bonus Plan.