A majority of employees across the country eligible to participate in a stock purchase plan do not take advantage of the benefit, leaving behind billions of dollars they could have pocketed.

Just last year alone, America’s working class lost out on $45 billion in unused money from employee stock purchase plans (ESPPs), according to Aaron Shapiro, who founded Carver Edison, a fintech start-up in the Soho section of New York City that aims to change how employees and employers view the benefit, hoping they will jump on board.

The company, Shapiro noted, has backing from Eli Broverman, co-founder of the largest robo-advisor, Betterment, and Jeff Cruttenden, co-founder of Acorns, an investing app. 

“It’s a very powerful story for employees where they can build a meaningful amount of wealth; but also from the corporate side, there is a very real business case for companies that are always looking for ways to reinvest and continue to grow,” he said.

The companies typically offering employee stock purchase plans are in the technology, health-care and financial services sectors, Shapiro said.

As for the target employee, Shapiro said there is a lot of interest from millennials, and those nearing retirement age, who see the benefit as a way to help themselves build wealth before they retire.

Shapiro explained that such plans usually run over a six-month period. So for example, an employee signs up on January 1 and every two weeks for the next six months the amount of money goes to buying stocks at a discount, which is usually 15% for most companies. That 15% is off the lower or ending price in a six-month period.

“So quite literally you can have a company stock price on January 1 for $10 and on June 30, it’s $100, and employees get to buy stock at 15% off $10, even though the stock is worth $100.   

“It’s complete arbitrage, because there is always a structurally locked-in profit of at least the value of the discount at a moment in time,” Shapiro said, adding that the stock value can go down or it can go up after the employees own the shares. But employees who participate in these plans already have a head start on the rest of the market because of the discounts provided through the plan.

Shapiro noted that there are many examples of companies that have made their employees richer. One example, he said is Roku, the developer of online media, whose stock prices “have gone through the roof” in the past couple of months. Here, he said employees are buying stocks at a 60% to 70% discount of the market price. “It’s really remarkable.”

But lack of participation is still a problem. Shapiro attributes that to people not willing to see their paychecks get smaller. “If you want to participate in the plan, you have to be able to afford the payroll contribution,” he said.

In an effort to blunt the paycheck problem, Shapiro said his company works with public companies through a feature called “cashless participation,” for which he received a private letter ruling from the IRS giving the company the go-ahead to implement its Carver Edison ESPP loan program, while retaining qualified tax status for its employee stock purchase plan.

The program, Shapiro explains, makes it possible for more employees to take advantage of their employers’ plan without actually seeing their paychecks get smaller. It allows eligible employees to maximize their ESPP contribution with limited payroll deductions, Shapiro said.

With cashless participation, Shapiro explained that employees sign up for the ESPP and select the amount to be taken out of their paychecks—say, $100 every two weeks for six months. Right before the end of that six-month period, Carver Edison writes a check to the employer through a temporary interest-free loan on behalf of the employee, maximizing that person’s contribution.

The employer then issues the appropriate amount of stock and Carver Edison sells enough shares to repay the loan. The net share, which is always more than employees could purchase on their own, are deposited in their brokerage accounts.

Shapiro agreed that the plans can be confusing for employees, especially if they have never before owned stocks.

“What we have had to do is change the way the industry thinks and talk to employees, not only about the cost component but about the education component as well because employees don’t know how this works,” he said.

Shapiro would not reveal the companies he has worked with or is working with, but he said they are on track to onboarding 10,000 to 15,000 employees in the program.