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ESPPs: Basics


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VIDEO! Employee Stock Purchase Plans (ESPPs): Core Concepts & Benefits

Bruce Brumberg
Presented by the editor-in-chief of myStockOptions.com, this dynamic video covers the fundamentals of employee stock purchase plans (ESPPs). Animated examples clearly illustrate the benefits that ESPPs can provide for employees. Running time: 3:35

Six ESPP Essentials (Part 1): Enrollment, Plan Type, Purchase Timing This is premium content

Matt Simon
An employee stock purchase plan can be a great benefit, but the rules and taxation are tricky. This two-part article presents six topics you must be familiar with to get the most from your ESPP. Part 1 covers enrollment, plan types, and offering/purchase periods.

Key Dates And Terms You Must Know For Your Company's ESPP This is premium content

Matt Simon
Your employee stock purchase plan (ESPP) may be one of the best benefits your company offers. However, to maximize its value, you must know its key dates and terms. This article explains the basics you need to know for your ESPP participation.

Are You Taking Full Advantage Of Your Company's Employee Stock Purchase Plan?

Sandra Sussman
Many employees don't take advantage of their companies' employee stock purchase plans (ESPPs). I want to give you a better appreciation of why ESPPs are a good deal.

Fundamentals Of Employee Stock Purchase Plans (Part 1): Basic Structure And Terms

Alisa Baker
Your company's employee stock purchase plan (ESPP) may be one of the best employee benefits in your total compensation package. However, to maximize the value of your ESPP, you need to understand how it works. This starts with knowing its basic structure and key terms, and how ESPPs work in both up and down markets.

Fundamentals Of Employee Stock Purchase Plans (Part 2): Design Limitations And Enrollment Procedures This is premium content

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.

Employee Stock Purchase Plans: Qualified And Nonqualified Plans This is premium content

Bruce Brumberg
myStockOptions.com
PowerPoint presentation (in PDF) that Bruce Brumberg, editor-in-chief of myStockOptions.com, developed for talks and meetings on the basics of employee stock purchase plans. Covered topics include types of ESPP, the ESPP tax treatment, and survey data on the use of ESPPs by companies. (Premium members may request permission to use it at their companies.)

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What is an employee stock purchase plan?

An employee stock purchase plan (ESPP) is a type of stock plan that permits employees to use after-tax payroll deductions to acquire shares of their company's stock. Plans can have...

How does an ESPP differ from a stock option plan?

Employee stock purchase plans tend to be viewed as a benefit while stock options are a form of compensation. From an employee perspective, there are some differences in operations, eligibility, and design...

What are the benefits of participating in an employee stock purchase plan?

You become an owner in your company, with all the financial upside and risks that any investment can bring. By participating in the plan...

What are the most common eligibility requirements for ESPPs? This is premium content

With ESPPs, the most common criteria for eligibility is...

Why do companies offer employee stock purchase plans?

ESPPs offer many benefits to companies and employees. Surveys show that...

What are the different types of employee stock purchase plans? What are their features? This is premium content

In general, an ESPP fits into one of three categories: tax-qualified, not tax-qualified, or direct purchase...

How does a Section 423 ESPP work?

Employee stock purchase plans of this type are "qualified" under Section 423 of the Internal Revenue Code. When you enroll in the plan...

What makes a Section 423 ESPP a good deal?

You can purchase company stock at a discount, with special tax treatment when you hold the shares long enough. The deal is even better when your ESPP has...

How does an ESPP work if it is not a qualified plan under Internal Revenue Code Section 423? This is premium content

If it is structured like a qualified Section 423 plan (except for whatever feature disqualifies it), it will work in the same way but without...

When did ESPP expensing become mandatory, and how may my ESPP change? This is premium content

Mandatory expensing started on January 1, 2006. Companies must recognize an earnings charge unless their ESPPs fit into the discount safe harbor rule. This has led companies to re-examine features of their ESPPs, including...

How many employees generally participate in ESPPs? This is premium content

In its 2011 Stock Plan Administration Survey, the National Association of Stock Plan Professionals (NASPP) found the following rates of participation among employees at the surveyed companies...

Do surveys show how employee stock purchase plans are changing with mandatory expensing and other developments? This is premium content

Companies are taking various approaches to modifying the features of their ESPPs: reducing the discount, shortening the lookback period, or even...

How can I find out whether my company has an employee stock purchase plan, what type it is, and what its basic features are? This is premium content

Since these plans are broad-based...

What documents should I read before deciding to participate in my company's ESPP? What is my company required to show me? This is premium content

Along with giving you the required prospectus, your company can probably provide brochures and enrollment materials about the plan and how it works. You want to carefully review the...

What is the eligible compensation that can be used for calculating the money that is available for the stock purchase? This is premium content

The IRS lets companies define this as long as...

How is the fair market value of company common stock determined for calculating the discounted purchase price?

Fair market value is determined in a number of ways that vary...

Under my company's ESPP, do I pay commissions on the purchase of stock or on the sale of that stock?

Because companies usually pay all costs associated with administering plans...

What happens to my payroll deductions? What happens if more money has accumulated in my ESPP account than can be used to buy shares? This is premium content

The deduction amount that you have authorized is withheld from each paycheck and is credited to a non-interest-bearing book entry in your company's accounts. In the short term...

What happens to the purchased shares, and when will I receive my stock certificates? This is premium content

Once you purchase the shares, you are a regular shareholder with voting rights and receive any dividends. Your company may arrange for your shares to be held in book-entry form in an account in your name...

When can I sell my ESPP shares? This is premium content

In general, you may sell your shares at...

How do I sell shares that I acquired through a stock option exercise, restricted stock vesting, or ESPP?

Whether you hold stock certificates, hold your shares in a brokerage account, or have an online trading account, you will need the assistance of a stockbroker...

Why does my employer require me to give notice of a sale of ISO or ESPP stock? This is premium content

If you make a disqualifying disposition with your ISO or ESPP shares...

If I leave the company, what happens to the money that has been deducted from my paycheck to purchase ESPP shares?

You will continue to own stock purchased during your employment, but your eligibility for participation in the plan ends. Any funds withheld from your salary will be...

How will a stock split affect my ESPP and the shares I purchased just before the split? This is premium content

You want to review your ESPP documents for a provision that...

How does the split affect brokerage accounts of ESPP participants? This is premium content

Since, with a brokerage account, your shares are held in "street name" your account will be credited with the split shares on the payable date...

How does the split affect the ESPP enrollment price that will be established just prior to the split? This is premium content

Most ESPPs have a provision that makes an adjustment...

What happens to my ESPP when my company is acquired? This is premium content

Your contribution does not roll over into the buyer's ESPP, and rarely is the target's offering period continued after the deal is closed...

In an acquisition, what happens to money that has been waiting to purchase shares in my ESPP? This is premium content

Check your company's plan for any specific provisions, including its flexibility to amend...

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