Top 10 financial-planning rules for ESPPs
Favorable qualified ESPP tax treatment: how long must shares be held?
Articles, videos, podcast, and other resources on ESPPs
Survey correlates participant education with ESPP success
Visit us at NASPP 2016 in Houston
ESPP course among Learning Center offerings for CEP and CFP continuing education credits



This issue of our quarterly newsletter showcases some of our award-winning content on employee stock purchase plans (ESPPs). Below you will find information about FAQs, articles, podcasts, and videos that give a taste of our expertise on this and every other topic in stock compensation. For much more, see our ESPP section and the ESPP portions of the Tax Center. Thanks for reading!

NEW FEATURE! Now you can take a piece of our expertise wherever you go with our new free app for iPad/iPhone and Android: Stock Compensation Glossary. For details, see our full description of the app.

Don't want to wait for our quarterly newsletter updates? The Blog is the best way to stay on top of equity compensation news and the latest developments at our website. You can also follow us on Twitter.

This summer marked 16 years since we launched Thank you for using our website and for your support and feedback over the years. We continue to enjoy helping stock plan participants, ESPP participants, and their companies get more value from equity plans.

—Bruce Brumberg (Editor-in-Chief)

FAQ: What are the 10 most important financial-planning rules for employee stock purchase plans?

Before you participate in your company's employee stock purchase plan (ESPP), understand the following essential points for financial planning with ESPPs.

1. Set goals. Understand the value of your ESPP participation and how it fits into your life. What exactly do you want to do with the proceeds from the eventual sale of the shares? This consideration should include important life events and financial-planning goals.

2. Know what type of ESPP you have. There are two types of ESPPs: tax-qualified and nonqualified. It is vital to know which you have.

3. Find out how purchase periods work, and understand the ESPP life-cycle. During a purchase period, payroll deductions are accumulated. The offering period and the purchase period can be the same length (e.g. six months), or the offering period can comprise two or more purchase periods. You should know the maximum you can contribute, whether you can increase or decrease your contribution amount during an offering, and how you can withdraw from the offering.

4. Understand purchase discounts and lookbacks. Your company will specify the discount before the offering begins. If your plan has a lookback feature, the discounted purchase price that you pay is based on the stock price at either the start or the end of the offering period, whichever is lower.

5. Learn the impact of job termination. If you leave the company, you will continue to own shares purchased for you during your employment, but your eligibility for participation in the plan ends.

6. Know the timeline of the ESPP holding periods. If your ESPP is tax-qualified, the tax consequences depend on whether you meet the holding periods required for favorable tax treatment. Also find out whether your company imposes its own mandatory holding period.

7. Understand ESPP taxation. Your tax treatment is determined by the length of the holding period after both the start of the offering and your purchase date. See related FAQs for examples of the tax treatment when the holding periods are met, when the holding periods are not met, and for nonqualified ESPPs. This also affects your tax-return reporting.

8. Decide whether you want to sell or hold the shares after purchase. Whether you hold the shares and for how long will affect your tax treatment when you sell them. Consider company trading blackouts and ownership or retention guidelines.

9. Watch tax rates in the year of sale. Anticipate what your tax rate will be in the year when you plan to sell ESPP shares. Yearly income above certain thresholds raises your rate of capital gains tax and triggers a Medicare surtax (see a related FAQ).

10. Beware of overconcentration in company stock. Consider sales of stock for healthy investment diversification.

To read a detailed discussion of all these topics, see the in-depth article on financial planning for ESPPs.

Eaton Vance Investment Managers: Goals-based solutions for optimizing wealth

Eaton Vance offers strategies and tools to help financial advisors and investors:

  • Diversify or manage the risks of concentrated stock holdings
  • Design a tax-managed completion portfolio around a concentrated security
  • Enhance risk-adjusted portfolio returns and generate current income
  • Minimize capital gains and other taxes

Financial advisors: Call our Wealth Strategies Group at 617-672-8500.

FAQ: For how long must I hold shares purchased under a Section 423 ESPP to receive favorable tax treatment?

To get favorable long-term capital gains treatment, you have to hold the shares purchased under a Section 423 ESPP for more than one year from the purchase date and more than two years from the grant (or enrollment) date. The timeline below illustrates the concept of the holding period, showing how long you must keep the shares to prevent a disqualifying disposition and make a qualifying disposition at sale.

However, even if you hold the stock long enough, not all of the gain over your purchase price will be capital gain. For more, including an example showing the tax breakdown, see the full FAQ. For other examples of ESPP taxation when shares are sold, see a related FAQ.

Return to table of contents

Articles, Videos, And Other Resources On ESPPs

Below we list selected articles, videos, and podcasts about ESPPs in the award-winning content of The extensive section on ESPPs at is complemented by an interactive quiz and a self-study course and exam for CFP and CEP continuing-education credits. All of this content is available with Premium or Pro Membership or through corporate licensing.


Six ESPP Essentials, by the myStockOptions editorial team
This two-part article series explains important ESPP aspects and concepts in plain English. Part 1 discusses the basics of ESPP participation, such as enrollment rules, plan types, and offering/purchase periods. Part 2 covers holding periods, tax rules, and the impact of various events, both personal (e.g. job loss) and corporate (e.g. M&A).

ESPPs 101: Key Dates And Terms You Must Know, by the myStockOptions editorial team
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.

ESPPs 101: Taxation Made Simple, by the myStockOptions editorial team
To make the most of your company's ESPP, you must understand the tax consequences of participation. This article explains the basics of ESPP taxation.

Fundamentals Of Employee Stock Purchase Plans, by Alisa Baker
Your company's employee stock purchase plan (ESPP) may be one of your best employee benefits. However, to maximize the value of your ESPP, you need to understand how it works. This four-part series covers all aspects of ESPPs, from the basic to the complex. Part 1 is free to all registered users of the site.

Are You Taking Full Advantage Of Your Company's Employee Stock Purchase Plan?, by Sandra Sussman
Strangely, many employees don't take advantage of their companies' employee stock purchase plans. This article will show you exactly why ESPPs are a good deal.

Ten Financial-Planning Rules Every ESPP Participant Should Know, by the myStockOptions editorial team
NEW! Employee stock purchase plans (ESPPs) are a super deal. However, the related taxation and financial planning can be deceptively complex. This article presents the essential points that you should understand before you participate in your company's ESPP.

ESPP Contribution Limits And Why They Matter To You, by Bruce Brumberg
NEW! If you are enrolled in a tax-qualified employee stock purchase plan, the amount of company stock that you are allowed to purchase is limited. You will want to keep this in mind when you allocate part of your salary to your ESPP. Read this article to understand how the contribution limits affect your ESPP planning.

IRS Form 3922 For ESPPs: What You Need To Know, And How It Can Help You Understand ESPP Taxation, by Bruce Brumberg
Stock purchases made through an ESPP during a calendar year are reported to you and the IRS on Form 3922 early in the following year. This article explains what you need to know about the information on the form, and how the form can help you better understand the complexities of ESPP taxation.

Employee Stock Purchase Plans And Your Financial Planning, by Bruce Brumberg
ESPPs are popular and prevalent at most public companies. However, the structure of these plans is changing. As this two-part article series shows, these modifications may affect your decision to participate in your ESPP and its place in your financial planning.

ESPP Choices: Flip Or Hold?, by Timothy Farmer and Gregory Geisler
After you decide to participate in your company's ESPP, you must choose whether to sell the stock soon after purchase or to hold it (and for how long). This two-part article series examines different ways to participate in your ESPP according to relative risk tolerance, timeframe, and needs for money.


Employee Stock Purchase Plans (ESPPs): Core Concepts & Benefits
Running time: 3:35. Bruce Brumberg, the editor-in-chief of, clearly explains both the fundamentals of employee stock purchase plans (ESPPs) and the benefits that ESPPs can provide. Using animated examples, this video covers key ESPP concepts, including the offering period, the purchase date, lookbacks, and discounts.

Employee Stock Purchase Plans (ESPPs): Key Rules & Decisions
Running time: 2:53. Bruce Brumberg, the editor-in-chief of, clearly explains the important rules you must know and the key choices you will have to make when you participate in an employee stock purchase plan (ESPP). Topics include ESPP features and the related basic financial-planning concepts.

Employee Stock Purchase Plans (ESPPs): Taxes
Running time: 4:24. Bruce Brumberg, the editor-in-chief of, clearly explains the five key tax rules you must know when you participate in an employee stock purchase plan (ESPP). Illustrated by animated examples, the covered concepts include the special rules that depend on how long you hold the shares.


Podcast! Basics Of ESPPs, by Bruce Brumberg
In this eight-minute podcast, the editor-in-chief of explains how ESPPs work, including enrollment, offering periods, lookbacks, purchase, and taxation.


Employee Stock Purchase Plans: Qualified And Nonqualified Plans, by Bruce Brumberg
Bruce Brumberg, editor-in-chief of, developed this presentation 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 the PowerPoint version at their companies.)

Return to table of contents

Insider Trading Prevention And Education:
Think Twice Video And Intranet Series
Request free previews at the Think Twice website

Insider-trading prosecutions are a major priority of the SEC and the Justice Department. For two decades, the dramatic Think Twice video series has been a vital training and compliance resource for thousands of corporations and law firms trying to prevent insider-trading violations. The Think Twice videos are celebrated for enhancing the value of corporate education by entertaining viewers with compelling stories.

Used by over 1,000 companies and developed with input from the SEC Enforcement Division, these powerful and 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 the Think Twice website. Both DVD and VHS formats are available. Qualified corporate buyers, including new IPO companies, can request free previews. Intranet licensing is available.

Return to table of contents

Survey Shows Correlation Between Participant Education And ESPP Success

We are big fans of employee stock purchase plans (ESPPs). They allow ordinary employees to become company shareholders and build wealth. At a socio-economic level, ESPPs can thus perhaps even reduce income inequality, as can other forms of equity compensation. On, we have so much content on ESPPs that we could be called as well.

Studies about trends in ESPP design can be hard to find. Fortunately, the National Association of Stock Plan Professionals (NASPP), the National Center for Employee Ownership (NCEO), and the Certified Equity Professional Institute recently published data from their joint 2016 ESPP survey. The survey results are summarized at the website of the NASPP. Responses were received from 239 companies, 91% of which have tax-qualified Section 423 ESPPs. Among the findings of interest:

  • 70% of respondents offer a 15% discount.
  • 50% have a six-month offering period.
  • 56% base the purchase price on the price at the beginning or the end of the offering period, whichever is lower.
  • 79% do not have a required holding period.
  • 54% spend less than 0.5% of their total compensation budget on the ESPP, while 21% spend between 0.5% and 0.9%.
  • 24% report that they do not use any particular way of communicating the plan to their employees. Among those that do use specific communication channels, the most common means are email (93%) and the company website/intranet (90%).
  • 36% of the companies are very satisfied with their ESPPs, and another 36% of them are somewhat satisfied; 25% percent report feeling neutral about their ESPPs; and 3% are dissatisfied with their ESPPs.

That last point is especially interesting. Not surprisingly, the companies that report spending more on participant education tend to also have a higher level of satisfaction with their ESPPs. As the NASPP observes in its summary of the results, companies therefore "might be wise to consider investing more in educating employees about their plans." With features such as those mentioned in the survey, an ESPP can be a really good financial deal for employees.

The full survey results, plus analysis of them, can be purchased from the NCEO.

Return to table of contents

Visit Us At The NASPP Annual Conference In Houston

We are excited about the NASPP's annual conference, being held this year in Houston (October 24–27). As always, will have its cheerful booth in the exhibit hall, where our editor-in-chief Bruce Brumberg will be available as an NASPP-designated expert to answer questions on stock plan education/communications and on equity comp taxation. Bruce will also speak on a panel in one of the conference sessions: Mind Your Ds & Ts: Death, Divorce, Disability and Terminations, a discussion of proactive measures to help your company, its employees, and their families better prepare for life events related to equity awards, including retirement, disability, death, and divorce. The session will take place on Oct. 25, 12:45–1:45 p.m.

If you attend the conference, please stop by our exhibit booth for a chat and pick up a souvenir!

Return to table of contents

AdvisorFind Directory
Find a financial, tax, or legal advisor with experience in stock compensation

Stock compensation raises many questions.

  • How much should you contribute to your ESPP?
  • When should you exercise stock options?
  • Should you sell or hold restricted stock at vesting?
  • How can you diversify your company stock holdings?
  • How can you minimize your tax bill?
  • How do you negotiate for stock compensation in your employment agreement?

While is a good place to learn about concepts, issues, and general strategies in equity compensation, at some point you may need an advisor to help with your unique situation. Yet finding a good advisor can be hard when you are busy and don't know where to start. The AdvisorFind Directory from is for you.

  • Identify and contact an expert who can provide specialized professional guidance on equity compensation.
  • Search for advisors by geographical area, type of advisor, years of experience, minimum portfolio size, and other key criteria.
  • Look up resources for performing background checks on advisors.

Searching AdvisorFind is free and does not require registration at

Need CE Credits? Learning Centers At And Offer Credits For CEPs, CFPs, And Other Professionals and its sibling website have online self-study courses and exams offering continuing-education credits that can be used to meet the CE requirements of a few different professional designations. At, the Learning Center offers up to 25 credits for for Certified Equity Professionals (CEPs) and up to 15 credits for Certified Financial Planners (CFPs). In addition to providing CE credits, our courses and exams can also serve as internal certification programs for professionals at companies and brokerage firms who work with stock compensation.

The course and exam on employee stock purchase plans covers all of the key information that you must know to be well informed about ESPPs. Each course of study features podcasts, videos, articles, and FAQs from They are woven into a dynamic, interactive learning tool that teaches the topics in a memorable way. The answer key for each exam also links to relevant content on the site for further reading and learning.

Built on a similar model, the the Learning Center on nonqualified deferred compensation offers up to 6 continuing-education credits for Certified Financial Planners, 6 Professional Achievement in Continuing Education (PACE) credit hours for CLU® and ChFC® certifications, and up to 12 CPE hours for credentialed ASPPA members.

Return to table of contents

Subscription And Licensing Information

If you found this update from 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.

TO SUBSCRIBE: Visit and register as a new user. Be sure to check the box for our email newsletters.


Return to table of contents