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How does an ESOP differ from other types of defined contribution plans?

April 26, 2017contribution defined differ ESOP plans types

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How does an ESOP differ from other types of defined contribution plans?

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In general, while defined contribution plans may invest all or a portion of their assets in employer stock, ERISA suggests that defined contribution plans (other than eligible individual account plans) invest in a diversified portfolio of securities. However, ESOPs are designed to invest primarily or exclusively in the stock of the sponsoring company and may borrow money to make these investments.