Teakdecking Systems ESOP Plan
Marilyn DeMartini, Guest Writer…
It’s NOT a Fable – It’s Employee Stock Ownership Plan – the Way Employees Own a Piece of the Pie
In today’s heavy mergers and acquisitions climate, especially in the marine industry, Teakdecking Systems is proud of its roster of long-time employees, some being with the company for over 20 years. Aside from working for a leader in the marine industry, part of that loyalty may lay in the fact that 112 employees are shareholders in the company.
TDS was formed in 1983 by Ann and Lars Lewander and remained a privately held, family-owned business until 2008 when they created an ESOP to establish a long-term retirement strategy for all their employees. The company formed a Communications Committee to help educate and inform the staff about the opportunity and to help employees “Think & Act Like Owners.”
“Our effort to better explain the ESOP opened our team’s eyes to what the company owners were providing to them,” says, Dan Paver, Co-Chair of the Committee, “We helped them see that getting vested in the company ensured them a retirement future that they would not otherwise have had.”Dan Paver – Sourcing and Sustainability Coordinator
Eligibility to participate in the ESOP is based on 1000 hours of work within one year; the employee must also be 21 years old. After the 12-month eligibility requirement, an employee is enrolled in the ESOP Plan on the earliest eligibility date in either first or third quarter, depending on the hire date.
Employees become eligible to receive funds from the ESOP at retirement, based on the number of years of employment as they are vested (earn the right to receive benefits) at 20% per year (beginning in their second year), becoming 100% vested after six years of employment. Beneficiaries are recorded–a spouse if married, or a selected beneficiary if single. ESOP participants accrue shares in the plan over time and are paid the value of their shares over time, typically after they leave the company. There are other selected limited payout options available, before or after retirement, based on options described and governed in the plan document.
What is an ESOP?
The first ESOP was formed in 1956 by Louis Kelso, providing employees of Peninsula Newspapers the opportunity to buy the company from its owners. Decades later, laws governing ESOPs were included in the Employee Retirement Income Security Act of 1974 (ERISA) with rules changing to require all retirement plans, including ESOPs to be shared by all employees from entry level to the CEO.
The National Center for Employee Ownership (www.NCEO.org), a non-profit, was formed to provide resources and research to help employees better understand the benefits of employee ownership.
Employee ownership is a term for any arrangement in which a company’s employees own shares in the company’s stock. This broad concept can take many forms in practice and can serve many different goals. Building employees’ retirement security, boosting company performance, and reducing a company’s tax burden, are just some of the potential reasons that companies and business owners pursue employee ownership.
The most common structure for broad-based employee ownership in the U.S. is the ESOP used by approximately 6,500 U.S. companies including one-half of Fortune Magazine 100 Best Companies to Work for in America. Approximately 14 million U.S. workers are ESOP participants. Research posted by NCEO states that employees enrolled in ESOPs make 5-12% more money in wages and enjoy three times the retirement assets. They are also less likely to be laid off.
ESOP at TDS
Vested TDS employees receive a statement in the fall of each year to track their account balance and vested amount. By understanding their investment in the company, the TDS team finds decisions made and actions taken reflect not just their benefit, but their benefit to the company, which circles back to them. This report is done by the company’s trustee, currently Michael S. Miller of Apex Fiduciary Services, LLC. Miller explains that while the ESOP is a company provided retirement plan, it is not a 401(k). There are no employee contributions and when the employee/owner retires, he or she takes the value of the stock, not the stock itself. “It’s all about you,” Miller told the TDS team at a recent staff meeting, “Benefits are directly related to the company’s performance and value, so you determine the stock price.”
“It’s all about you”
The TDS ESOP is valued each year by a third-party appraiser, currently Vision Point Capital, that reports back to the trustee on the company and the ESOP performance and value. The company’s appraiser, Will Rodriguez, advises employee/owners to work as efficiently as possible and be smart to increase the value of the company’s stock. “The lower the costs, the more profitable the Company, and thus the higher the value of the company’s stock,” he states.
Michelle Meerman, a TDS team member for two years, who became vested last year, states, “I learned about Teakdecking Systems’ ESOP plan during my second interview. Learning that I would have shares in the company, made me feel that TDS cares about me as a real part of the company, not just as an employee. That feeling played a role in my choosing to accept Teakdecking Systems’ job offer, and I am now seeing how I will reap the benefits.”Michelle Meerman – Sales & Marketing Coordinator
“We like to think of ourselves as an outstanding company in many ways, due to our reputation, sustainable practices and nearly 40 years in business,” says Richard Strauss, TDS President, “Offering our team the ESOP opportunity proves that we have the company’s interest at heart in the big picture, but all of our employees play a part in that long-term view—they also have a voice. We learn a lot from the ideas that our employees share. Each decision they make, whether it’s using more product or effort to do a better job is a reflection not just on them but on their company. That is why we emphasize to “Think & Act Like Owners” – it not only instills more responsibility, but provides more benefits,” he notes.Richard Strauss – President
Why not be a part-owner of the company you invest your time in?
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