Section 423 Plan

A Section 423 plan is a type of employee benefit plan that allows employees to purchase company stock at a discounted price, often through payroll deductions, as part of an employee stock purchase program. It’s designed to motivate employees and give them an opportunity to build wealth in the company they work for. The plan follows specific IRS rules to ensure fairness and tax advantages, such as offering the stock at a discounted rate but with certain limits on the purchase amount. This benefits both employees and employers by aligning interests and encouraging long-term investment.