Alisa Baker
Part 1 looked at the basic structural elements and terms of employee stock purchase plans (ESPPs). Part 2 considers more advanced design concepts, including tax code limits and enrollment rules.
Bruce Brumberg
Employee stock purchase plans (ESPPs) are popular and prevalent at most public companies. However, the structure of these plans is changing. These modifications may affect your decision to participate in your ESPP and its place in your financial planning.
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This depends on the structure of your plan and whether there is a discount and a lookback feature for the purchase price...
Not necessarily, as it depends on how your ESPP is structured...
In general, all employees at your company (or its designated subsidiaries or parent company) are eligible to participate. You need to be...
In its 2006 survey of companies with global stock plans in many countries, the National Association of Stock Plan Professionals asked companies about the eligibility requirements they apply to their ESPPs...
Technically, no, if you go by the wording of the tax code for qualified ESPPs under Section 423. For nonqualified ESPPs, companies can...
ESPP after-tax contribution limits vary by company requirements and are also subject to...
Procedures, rules, eligibility, and contribution amounts vary from company to company...
After you submit a subscription agreement, deductions will be made continually until...
The enrollment date is usually the first day of...
The grant date is usually the first day of the offering period...
During an offering period payroll deductions are accumulated. Shares are typically purchased under the plan at the end of the offering period...
The maximum ESPP "option" term (i.e., offering period) is 27 months for plans with a lookback feature but...
Some companies interchangeably use the terms "offering period" and "purchase period" when these are the same length (e.g., six months). Other companies have...
This is the last day of the offering (or purchase) period...
Payroll contributions that accumulate during the offering period...
A lookback is a provision in certain tax-qualified ESPPs. A lookback provision bases the purchase price not on the stock price at the time of purchase but, rather, on the...
Generally, yes. Under most ESPPs, participants can withdraw from the plan at any time before the...
Generally, participants who withdraw from the plan...
As should be indicated on your enrollment form...
Not usually. Once you stop deductions...
Yes, usually with a deadline for when the change must be made within each purchase period or quarter. ESPPs generally permit participants to...
This depends on the reason for the unused funds from your payroll deductions...
It depends upon the provisions of your company's plan. With some plans that use a...
Internal Revenue Code Section 423 imposes a $25,000 annual purchase limit on ESPP participants. The stock price to determine the maximum number of shares you can purchase is based on the...
Where an offering period spans more than one calendar year (with multiple six-month purchase periods)...
You'll receive a periodic statement...
Some companies may allow this, but...
No, unless you are deemed to be an "affiliate" of your company or...
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