Heidy Moon, reaps rewards of employee ownership program
Nobody knows the benefits of Hannibal’s Employee Stock Ownership Plan (ESOP) better than Heidy Moon, who is entering the new world of retirement after 34 years as a vital member of the Hannibal team.
“I actually began work with Kaiser Steel Tubing 37 years ago at the same location, and remember when Hannibal purchased the company three years later,” she remembers.
When ESOP was introduced to Hannibal employees in 2008, she was among the original participants of the program.
In her role as vice president of finance, Heidy was instrumental in developing the ESOP employee ownership concept for the company as both a retirement plan and an innovative program that allows every employee – salaried and hourly – to literally own shares in Hannibal Industries, Inc.
She said that while some employees may not be able to afford a 401(k) plan, ESOP is a more cost-effective alternative since no out-of-pocket contributions are necessary. Hannibal distributes its shares equally to its employees annually.
Now that she is retired, Heidy, who lives in Cerritos, California, plans to travel with her husband; they have already booked cruises to New Zealand, Australia and South America – before the New Year! “And, like most retirees, I plan to spend time with my family, including my two granddaughters.”
So, what exactly is ESOP?
Simply stated, it is a retirement plan that is an alternative to traditional 401(k) plans, but still regulated by the same laws that govern the 401(k)s. When companies like Hannibal launch an ESOP, they form a financial trust fund that purchases some or all of company shares and holds them in retirement accounts for employees.
What are the benefits to employees?
First and foremost, they get a retirement plan that typically requires no out-of-pocket contribution from them and is an affordable alternative to 401(k)s.
They can share in the rewards (profit-sharing) when the company performs well.
According to the ESOP Association, “ESOP-member employees enjoy better job stability. They are 6.2 times less likely to be laid off than those at conventionally owned companies. This results in reduced turnover rates for their firms because employees, who know the business and customers best, remain and provide uninterrupted products and services.”
And they typically receive more company financial information than the other plans provide.
The Retirement Payout
After becoming fully vested, the company – in this case Hannibal – “purchases” the vested shares from the retiring employee, and “pays” the employee in a lump sum or equal periodic payments, depending on the plan. Once the company purchases the shares and pays the employee, it then redistributes or voids those shares.
“Retiring employees cannot take the shares of stock with them, only the cash payment which can be rolled over into an IRA,” said an association spokesperson.
Last year, at the 10th anniversary of Hannibal’s ESOP participation, Hannibal’s president Blanton Bartlett said:
“Over the life of the ESOP, we’ve yielded a 30 percent return per year. It’s rewarding to witness how much pride and hard work out employee-owners put in to help build our company. I’m grateful to be a part of this.”
Coincidentally, one of Hannibal’s customers, Pacific Steel of Spokane, Washington, also is an ESOP company. One of its participating employees said recently that ESOP “gives its people a voice and share in the success of the company. We are equal owners in the company, not just employees.”