Certified Plan Sponsor Professional (CPSP) Practice Exam

Which of the following stock plans can provide an incentive for employee retention?

1. Stock options, profit-sharing plans, and pension plans

2. Stock bonus plans, ESOPs, and employee stock purchase plans

3. Retirement savings plans, deferred compensation plans, and cash bonuses

4. Healthcare benefit plans, matching contribution plans, and vacation days

The correct answer is: Stock bonus plans, ESOPs, and employee stock purchase plans

Stock bonus plans, ESOPs (Employee Stock Ownership Plans), and employee stock purchase plans are designed to encourage employee retention by aligning the interests of employees with the performance of the company. Stock bonus plans provide employees with shares of the company's stock as part of their compensation, typically subject to certain vesting requirements. This means that employees must remain with the company for a specified period to fully benefit from the stock ownership. By tying potential rewards to tenure, these plans incentivize loyalty and long-term employment. ESOPs are specific types of retirement plans that invest primarily in the stock of the sponsoring employer. They not only serve as employee benefits but also engage employees in the success of the company, providing them with a stake in its performance. As employees see the value of their shares potentially increase with the company’s success, it fosters a sense of ownership and encourages them to stay with the company over the long haul. Employee stock purchase plans allow employees to buy company stock often at a discounted price. The potential for financial growth through these investments incentivizes employees to commit to their jobs, as they see the tangible benefits of remaining with the company. In contrast, options that involve retirement savings or cash bonuses primarily serve to enhance immediate financial benefits rather than strategic alignment