Usually the enrollment period is when you sign up to participate in your ESPP, but at some companies it's the same as the offering period. When the periods are separate, your plan materials will present a clear distinction between the enrollment period, i.e. when you sign up to participate, and the offering period, i.e. when payroll deductions occur.

During an offering period, payroll deductions are accumulated. Shares are typically purchased under the plan at the end of the offering period (the exercise or purchase date). Offering periods are not typically associated with open-market purchase plans.

Most Section 423 ESPPs have offering periods of either six months or some multiple thereof (e.g. 12 months or 24 months). Plans with offering periods of more than six months typically include interim purchase periods.

Example: The offering period is 12 months. Shares are purchased at the end of each of two six-month periods within the 12-month offering period. The two purchase periods are (1) the first Wednesday of January through the first Wednesday of July and (2) the first Wednesday of July through the first Wednesday of January.

In this situation, with a lookback feature in the plan, the purchase price in any of these periods is based on the fair market value on either the first day of the offering period or the last day of the particular purchase period, whichever is lower. Companies can have longer offering periods (e.g. 27 months), with new offering periods starting every six months for employees to enroll in. When the stock price is lower on a subsequent offering date than when you started, your plan may automatically enroll you in a fresh offering period with this new, lower lookback price.

The graphic below illustrates the timeline of a typical ESPP life-cycle. (Click on the image below to see a larger version in a new window.)

Timeline of key ESPP dates

See a related article on all of the key dates and terms you must know before you participate in an ESPP.