ESPPs › Advanced

Your company's employee stock purchase plan (ESPP) can be a strong financial benefit, but the rules and taxation can be tricky. Part 2 delves into the complicated topics of holding periods, tax treatment, and the impact of various life events on your ESPP participation and holdings.

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.

After you decide to participate in your company's employee stock purchase plan, your next decision is whether to sell the stock soon after purchase or to hold it (and for how long). This article series examines different ways to participate in your ESPP according to relative risk tolerance, timeframe, and needs for money.

You can build your employee stock purchase plan into your long-range savings and retirement strategy. This article compares buying company stock at a discount through your ESPP to putting the same money into your 401(k) or another retirement plan.

Employee stock purchase plans (ESPPs) are changing in many ways, largely in response to accounting rules. For Part 2, myStockOptions.com asked financial and wealth advisors what they are recommending to clients about ESPP participation.

Companies make some information available voluntarily, while the reporting of other information is mandatory. Section 6039(a) of the Internal Revenue Code requires companies to send an information statement to employees who have exercised incentive stock options or have made purchases in a tax-qualified Section 423 employee stock purchase plan. ISO exercises are reported on IRS Form 3921. ESPP purchases are reported on IRS Form 3922...

Mandatory expensing started in 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...

Because of the accounting rule, companies have taken various approaches to modifying the features of their ESPPs: reducing the discount, shortening the lookback period, or even...

It is the price at the start of the purchase period in which you begin to participate...

Some plans are designed to start a new offering period every...

If you have more than one batch of company stock, you are responsible for providing your broker with enough information to identify which shares to sell. If you do not specify...

Companies use various methods to track your stock sales. These methods include...

Although the practice is somewhat uncommon, your company may have a required holding period after purchase to encourage share ownership and prevent the flipping of the stock. As for the tax treatment, this does...

You should read the terms of your stock plan and grant agreement. If the plan allows transfer upon death to beneficiaries, you should obtain the...

If your employment ends, most Section 423 ESPPs automatically...

ESPPs are not tax-qualified retirement plans or profit-sharing plans, so participating in an ESPP has...

If an IPO company wants to lock in the IPO price as the initial grant-date price of its employee stock purchase plan (ESPP), it can do so for the initial offering period of up to 27 months...

Generally, there is no violation for the enrollment at the start of the offering period or for the...

Federal and state securities laws may restrict...

The popular media sometimes confuse the term "blackout" with "lockdown." For stock plans, these terms apply to different...

To be tax-qualified under Section 423 of the Internal Revenue Code, ESPPs must follow certain eligibility rules and restrictions...

If your company's ESPP is qualified under Section 423 of the Internal Revenue Code, the Section 16 ramifications of participating in the plan are not as...