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Dick Broulim, owner of eight Broulim’s grocery stores throughout the state of Idaho, recently announced that he will be selling 49.5 percent of his ownership to the full-time employees of the company.
“It wasn’t made to replace our 401k but to help supplement it,” said Ian Martinson, store director for the Rexburg Broulim’s.
Martinson said the sold shares will go towards ESOP, otherwise known as an employee stock ownership plan.
Martinson said that with the new ESOP plan, employees will contribute 5 percent of their earnings into their 401k plan, and Broulim’s will match 4 percent into Broulim’s ESOP.
Martinson said that when an employee hits retirement age, they will be presented with the monetary value of their shares of the company.
“This was in the works before a lot of us even knew about it,” Martinson said.
Martinson said the first payment into ESOP was made by Dick Broulim in the spring of 2014.
Full-time employees at the Rexburg Broulim’s were told about the new plan during a meeting on Feb. 24, in which store leaders explained the new plan and showed employees how much money had already gone into their retirement plans with ESOP, Martinson said.
Martinson said the employees responded positively to the news.
“That was kind of cool, and it surprised everybody,” Martinson said. “I think they’re quite excited.”
Martinson said a third party will come in to determine the value of the company’s stock every year. He said the better the overall service the store provides, the greater amount the stock will be valued at, directly affecting the amount that retirees receive when they cash out their monetary value of the stock at retirement.
“The ESOP plan gives the management a lot more flexibility over the retirement plan,” said Sam Humpherys, a recent alumnus of the BYU-Idaho accounting program and current intern at an accounting firm in the Dallas area. “They’re not locked into the tax code as much as they are with the 401k.”
Martinson said it is the hope of the company that this will encourage employees to take pride in their work, with employees owning part of the company now.
“The good thing with ESOP, too, it kind of changes the mindset or mentality of our team members to be more conscious because they have a stake in the company now,” Martinson said. “By their helping, making the company more profitable and taking care of our guests, it’ll make them more profitable in their retirement. It changes that paradigm.”
Humpherys said he is concerned that having the ESOP plan invested only in Broulim’s stock could have a negative impact on retirement plans for employees.
“The issue I’m seeing with the new plan is that they’re a smaller company, and an employee who works their whole career at Broulims, there’s things outside of their sphere of influence that can determine whether or not Broulim’s stock goes up or down,” Humpherys said. “So I can work really hard as an employee and still see Broulim’s stock go down. So, yes, there is an incentive there, but there’s also things I can’t control there as well.”
Martinson said ESOP plans are more effective than 401k plans and are preferred by the federal government because they help to supplement the 401k plan, along with social security funds.
Martinson said the implementation of this new retirement plan will be good for the community. He said he is hopeful that it will promote longevity in the company amongst employees who wish to have a long-term career working at Broulim’s.
Martinson said that if employees stay here long term, money earned will be spent in the community and will stay in the community when employees retire in Rexburg, helping out other local businesses.
Martinson said to benefit from the ESOP plan, employees must be over the age of 21, be a full-time worker and must have been employed by the company for at least a year. The program does not cost anything to employees who meet these criteria.
“We’re just excited to have it,” Martinson said.