myStockOptions.com: College Funding With Stock Compensation:myStockOptions.com Update No. 32

Equity Focus: Get the straight talk on FAS 123(R) compliance for non-public companies; free on-demand webinar from Two Step Software at www.equityfocus.com/mso (see information below)

The academic year, along with university tuition payments, has begun. Your ability to pay for your children's higher education, and ultimately have more money for your retirement, may rest on your company's stock plan and related financial planning. As part of the expanding content in our section Life Events, we have added a new section on using stock compensation to pay for college. Below you will find the full text of two FAQs from this area.

We thank our users at all membership levels who continue to praise and preach the benefits of membership to fellow employees, to financial advisors, and to compensation/HR/finance professionals. In addition to the many users of our site who have become Premium Members and Pro Members, companies, stock plan providers, and financial advisors are also contacting us about:

For more information on these corporate services, please email inquiries to sales@mystockoptions.com.

~ Bruce Brumberg, Editor-in-Chief
_______________________________________________________________________________

Below are two frequently asked questions (FAQs) on paying for college with stock compensation. They are taken from the 700+ FAQs on myStockOptions.com. All of these are available for your company to license or by Premium or Pro Membership. Please do not copy or excerpt this information without our permission.

As long as the student is considered a dependent of the parent for financial-aid purposes, the parent does have to report stock options on line 88 of the 2007–2008 FAFSA (http://www.fafsa.ed.gov). This line states: "As of today, what is the net worth of your parents' investments, including real estate (not your parents' home)? Net worth means current value minus debt." The definition of "investments" includes "stock options" and "other securities" but provides little guidance on whether this includes employee stock options and at what value.

From informal discussions with the Department of Education that we have heard about from other experts, we believe the value that should be reported is the net value (after fees, commissions, taxes, etc.) of all types of vested stock and options as if they were sold at market value on the day the form is completed. The same rules apply for employee stock purchase plans and restricted stock.

Troy Onink, a financial advisor with expertise in college funding and stock plans, contributed to this answer. To read more about strategies for using stock compensation to fund education, see his articles on myStockOptions.com.

Insider Trading Prevention And Education:
Think Twice Video And Intranet Series
Request free previews at http://www.insidertradingvideos.com

With insider trading cases in the news, now is a good time for insider trading education and focusing on your compliance program. The dramatic Think Twice video series will teach, entertain, and jolt your employees and executives about insider trading and securities fraud. Used by over 1,000 companies and developed with input from the SEC Enforcement Division, these powerful videos with memorable story-lines will drive home key points on

what insider trading is
the penalties and consequences
how the SEC discovers illegal activity
what happens if illegal tipping or trading is suspected
how SEC investigations are conducted

For more information on the Think Twice video series, and a free white paper on insider trading prevention and education, see http://www.insidertradingvideos.com. Both VHS and DVD formats are available. Qualified corporate buyers, including pre-IPO companies, can request free previews. Intranet licensing is available.

I want to set up a program with my company and broker in which I automatically exercise options and sell stock to pay a regularly expected bill as it's received, such as my child's tuition. Can this prearranged selling plan violate insider trading laws and my company's blackout rules?

You are in luck. SEC Rule 10b5-1 now provides an affirmative defense from insider trading liability for executives, directors, and other company employees who sell stock under a trading program that was established at a time when they did not possess inside information. An additional requirement is a binding written contract to purchase or sell the security, specifying either the amount of shares or dollar value to sell automatically at specified dates, or a trade-price trigger (or some formula for determining it). The person for whom the shares are being sold cannot have any subsequent influence over the transaction.

We suggest that you contact company counsel and your lawyer, because the SEC rule adopted in the late summer of 2000 is still evolving, along with the practices under it. Other requirements under Rule 144 and Section 16 still apply, depending on your position in the company.

For more details on Rule 10b5-1 trading plans, myStockOptions.com has a special section devoted to them under SEC Law

Straight Talk on FAS 123R Compliance for Non-Public Companies;
Free On-Demand Webinar

Are you concerned about your equity compensation expense numbers under FAS 123R?

Experts from FAS123 Solutions, iComp LLC, and Two Step Software recently shared their recommendations with hundreds of CFOs, financial executives, and controllers of venture-backed and other non-public companies who attended Two Step Software's webinar—Straight Talk on FAS 123R Compliance: Five Things Your Auditors Will Want to Know.

It's the first webinar focused on how the new rules apply to non-public companies. And it's available on-demand.

On-Demand Webinar: Click here to download the recorded version and the related slides and white papers.

On-Demand and Live Demos: Would you like to find out how to reduce the time you spend on stock option administration and FAS 123R compliance? See how you can get rid of all those spreadsheets, easily calculate grant date valuations and amortize compensation expense, and have all the supporting documentation at your fingertips so you can avoid raising red flags with your auditors. Sign Up Now to take a look at Equity Focus, Two Step's hosted system for stock option administration and FAS 123R compliance.

Free white papers, demonstrations, and 14-day trial available at www.equityfocus.com/mso.

Contact: (800) 223-8900 or http://www.twostep.com, and please mention your referral by myStockOptions.com.

In the new section Life Events: College Funding, myStockOptions.com has a series of articles entitled Funding Your Child's College Education With Stock Options And Other Stock Grants. They were written by Troy Onink, the CEO of Stratagee, a financial-services firm.

Your ability to pay for your children's higher education, and ultimately have more money for your retirement, may rest on your company's stock plan and related financial planning.

Part 1 helps you understand the impact that equity grants have on financial aid eligibility.

Part 2 reviews the basics of gift tax and the tax treatment of stock compensation in your financial planning for higher education.

Part 3 focuses on methods to minimize capital gains at sale, planning for the kiddie tax and education credits, and strategies your children can use to pay for college.

For the rest of September these articles will be available free to all registered users at myStockOptions.com. This content is usually available only by Premium or Pro Membership to our website or through licensing by your company.

We are receiving high praise for the new membership level we call myStockOptions.com (MSO) Pro, specially designed for financial advisors, wealth managers, CPAs, and anyone who tracks and models equity grants for others. Introduced late last year, MSO Pro gives you the power to track and model grants for multiple clients with our award-winning record-keeper and tools, plus special features for proactive client communications and relationship-building. You can choose a membership level to track and model for 5, 10, 25, or more clients.

Track and communicate with multiple clients

Send grant alerts to yourself and to your clients

Create and save tool results as "scenarios" you can call again with one click

For more information on MSO Pro and to become a Pro Member, contact info@mystockoptions.com or click on myClients after signing into the site.

Below are selections from myStockOptions.com's newest award-winning educational content. All of these are available to our Premium and Pro Members and our licensees.

Are you more likely to receive a grant of restricted stock or restricted stock units? Which type of grant is more popular? Find the answers in the section on restricted stock units.

Does the IRS have rules on setting stock option exercise prices? Read about this in Basics: Grants.

How does your new grant of performance shares differ from your grant of restricted stock? See Restricted Stock: Advanced.

How are employee stock purchase plans (ESPPs) changing with mandatory expensing? Look in ESPPs: Rules.

This year Congress has held several hearings on the alternative minimum tax (AMT). According to Charles Rangel (D–New York), the Chairman of the Ways and Means Committee in the House of Representatives, a broad tax bill that includes AMT reform is in preparation. He hopes it will be considered by the House before the end of 2007.

A committee staffer has told myStockOptions.com that the legislative goal is to come up with some type of fix that is more permanent or at least longer-term than the yearly patches that have been made to extend the AMT income exemptions. Any fix depends on finding tax revenues to replace what the government gets from current rules under the "pay as you go" budget rules adopted in early 2007. myStockOptions.com has also learned from its committee contacts that revising the AMT income calculation to remove the ISO spread at exercise/hold is not, apparently, under consideration.

For the background of the AMT and a detailed summary of developments in Congress about AMT reform during the past year, see the relevant FAQ on myStockOptions.com. Read about how the AMT works and related financial and tax planning in the sections ISOs: AMT and ISOs: AMT Advanced.

Equity Compensation Forfeit Value®
A Crucial Metric for Employers, Employees, and Advisors

Forfeit Value® is the value employees leave behind upon terminating their employment. It is the essential and sole metric that determines the ability of an equity compensation plan to retain key employees. Yet employees and even compensation professionals dramatically underestimate Forfeit Value®.

Research conducted by business school professors at the University of Illinois and Michigan State University presents compelling evidence that:

Employees on average underestimate their Forfeit Value® by 60%.
This underestimation can be substantially eliminated with a personalized education program that explains the concepts and provides them with their specific Forfeit Value®.

The data used in this study came from questionnaires administered before and after StockOpter® Personalized Education sessions from Net Worth Strategies, Inc.

For the employer, StockOpter® Personalized Education is cost effective insurance against unnecessary loss of key personnel. For employees and their advisors, understanding Forfeit Value can prevent massive erosion of this critical asset.

For more information on Forfeit Value® as well as other metrics essential to retention, motivation and timely decision making regarding equity compensation visit www.EquityCompensationEducation.com or contact Bill Dillhoefer at bdillhoefer@networthstrategies.com.

Have something to add to the discussion in an article on our website? Just want to say you found it useful? You can now leave comments at the foot of articles on myStockOptions.com. This new feature gives registered users a voice in our editorial content. Watch for further enhancements to our website in the next few months!

myStockOptions.com will have a strong presence at the annual conference held by the National Association of Stock Plan Professionals (NASPP), taking place this year in San Francisco (October 9–12). If you attend, please stop at our exhibit booth to say hello. We will be there to answer any questions you have about myStockOptions.com and to discuss our various innovative services, including:

If you found this update from myStockOptions.com useful, please share it with your friends and colleagues, but do not copy or customize the text itself for your company's use without express permission.

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