Author: Tim Nguyen

Summary:

When was the last time you measured your procedures against the yardstick of industry best practices? Are your procedures stagnant and unchanging because it “has always been done this way?” Join us for a discussion on the importance of including best practices in your day-to-day administration.

Webcast Materials

Speakers:

(One hour of Certified Equity Professional continuing education credit is available for attending. See the CEPI website for more information on CEP continuing education requirements.)

Have a question about this webcast?

For  inquiries call our office at (408) 979-8700

Or feel free to email your questions to Info@sos-team.com

Receive News About Our Next Webcast

Marching on in March

The old saying is that March comes in like a lion and goes out like a lamb. We are mid-way through the month and the lion has yet to depart. While the East Coast is being buffeted by snow and storms, the West Coast is seeing rain, rain and more rain. No matter what coast you are on, while the weather rages outside, stay warm and dry while enjoying this edition of Xtra.

For those of you on the West Coast, don’t forget that the 14th Annual CEP and Silicon Valley NASPP Symposium will be held on March 27 in Santa Clara, California. And on March 30, Nasdaq and the NYSE will be closed in observance of Good Friday.

And what March Xtra would be complete without a reminder of the April income tax filing deadline? This year the 15th falls on a Sunday. With Washington, D.C.’s holiday on the 16th, procrastinators will be rushing to the post office to file on the deadline of April 17.

SOS is the only true outsourcing firm within the equity compensation marketplace. We deliver a team-based approach to filling that empty chair in your department. SOS takes away the burden of hiring, retaining, managing, and replacing a direct hire.

It's All About the Non-Qual

Part III of our Beginner’s Equity Series covers another type of stock option:  the Non-Statutory Stock Option or NSO.  NSOs are also referred to as “non-quals”, “NQs” or “NQSOs”.  NSOs are governed by fewer rules than ISOs (see Part II of the series here on ISOs) and are a more flexible type of stock option. 

Grant:  The eligible participant is granted an NSO, which is approved by the Board of Directors or any authorized sub-committee of the Board.  NSOs can be granted to employees or non-employees.  NSOs also can be granted to either US employees or non-US employees.  There is no statutory limit on the number of shares that may be granted under an NSO, but the equity plan may place a limit on the number of shares that may be granted.

If the NSO is granted to a Section 16 reporter at a publicly traded company[1], Legal will disclose the terms of the NSO on a public filing (Form 4) due two days after the date of grant.

Vest:  At vest, there is no taxable event for the employee.  The taxable event occurs at exercise.

Exercise:  Federal and state taxes are due at exercise of an NSO by an employee[2].  Depending on the plan’s guidance, the gain may be either the difference between the fair market value and the exercise price or the actual sale price and the exercise price.  The gain is compensation income and all applicable taxes (Federal, State, Social Security, Medicare) should be withheld by Payroll.

Employees may have any of the below listed choices regarding payment of taxes and exercise price at exercise.

● Electing to have enough of the shares sold on the open market to cover the option cost and the taxes due. The broker then remits the funds to the company.  This election is usually available only to publicly traded companies.

● Electing to have all of the shares sold on the open market. The broker then remits the funds to cover the option cost and the taxes to the company and gives the employee the remainder of the proceeds.  This election is usually available only to publicly traded companies.

● The company withholds shares in value equal to the amount of the option cost and the taxes due and deposits the remainder of the shares in the employee’s account. This is called either “withholding shares” or “net settlement”.

● Electing to allow the company to withhold money from their paycheck(s).

● Electing to write a check payable to the company for the amount of the option cost and the taxes due.

Accounting/Treasury reconciles the bank account to ensure the correct amount of money was received from employees for the option cost (shares exercised multiplied by the exercise price) plus taxes owed and deposits the purchase funds into the company’s general account. 

Legal will report the exercise of the NSO on a Form 4 filing within two business days of the exercise date, if the company is publicly traded.

Share tracking after exercise:  Since the taxable event for US employees occurs at the exercise of shares no tracking is required.      

Tax implications for the company:  At the exercise, the company is entitled to a corporate tax deduction in the amount of compensation they report on behalf of the employee.   The Tax Department will request reports from Stock Administration regarding the amount of a NSO exercise on a regular (monthly, quarterly or annually) basis to estimate the tax deduction for the year.

Stock Based Compensation Expense:  At grant, Finance will start calculating and disclosing expense (in the financials) until either the NSO is forfeited (due to employee termination) or the NSO is fully expensed.  The expense can be calculated by different methods, but the most popular is the use of an option valuing model called the Black-Scholes model.  No matter what model is used, Accounting Standards Codification Topic 718, Stock Compensation states that the following factors should be taken into account when calculating the expense of an option: 

● The option’s exercise price;

● The option’s expected term or life;

● The fair market value of the company’s stock;

● The volatility of the company’s stock;

● The dividend payment of the company’s stock; and

● The risk free interest rate.

Company’s US reporting obligations[3]For US employees, the company reports the gain as income on the employee’s Form W-2 in the year of sale.   There is no statutory reporting required for NSOs under the Internal Revenue Code other than the Form W-2 reporting at exercise.  Companies frequently send courtesy statements to employees at year end with the NSO exercise information in them.  However, this is not required.

Option Expiration:  An option is no longer outstanding if:

● It is fully vested and fully exercised;

● The life of the option passes and it expires without being exercised; or

● The option’s life is terminated due to the employee no longer providing service to the Company.

We hope you have a better understanding of Non-Statutory Stock Options. If you have a topic you would like to see included in our Beginner’s Equity Series, please let us know at xtra@sos-team.com.


[1] Section 16 reporters:  Section 16 of the Securities and Exchange Act of 1934 regulates the trading of company securities by key corporate insiders.  These insiders will usually be the entire Board of Directors, the CEO, CFO, General Counsel and others deemed to have broad decision making power in the company. 

[2] Non-Employee Board of Directors and Non-Employees are not subject to tax withholdings.  The company is required to report income from the gain on a 1099-MISC at year end.

[3] International reporting obligations vary from country to country.  This document only addresses IRS reporting obligations for US taxpayers.

Upcoming Equity Compensation Webcast

Our webcasts cover high-priority equity compensation topics

SOS Educational Webcast: Do This, Not That: How Do Your Procedures Measure Up?

Thursday, April 12, 2018 11:00 AM PDT

When was the last time you measured your procedures against the yardstick of industry best practices? Are your procedures stagnant and unchanging because it “has always been done this way?” Join us for a discussion on the importance of including best practices in your day-to-day administration.

(One hour of Certified Equity Professional continuing education credit is available for attending. See the 
CEPI website for more information on CEP continuing education requirements.)

So Quotable:
"Just because you’ve always done something a certain way, doesn’t mean you should continue to do it that way. Spending a little time to look at your current processes will most always result in big steps towards improvement. Implementing best practices can not only mitigate risk, but improve efficiencies." - Laura Kreman, Stock & Option Solutions, Inc.

Speakers:

●  Laura Kreman, Stock & Option Solutions, Inc.

●  Kathryn Randall, CEP, Stock & Option Solutions, Inc.

Our Educational Webcast Series will help you boost your CEP credit in no time.

SOS Consultant Corner: Creating a User-Friendly User Guide

When clients ask me to write a stock administration user guide, it’s because they either want to be prepared for auditors or they want to avoid knowledge loss that comes with employee turnover.  While I’ve tried a variety of platforms such as word processors and spreadsheets, I have found that presentation applications like Google Slides or PowerPoint work best when developing a user guide.

Find 4 reasons below on why I prefer building a user guide with a presentation application and why you should consider doing the same.

1. Slides are visual. Slides tend to use screenshots, highlights and captions to communicate information, which is easier to follow as oppose to a Word doc filled with paragraphs and outlines.

2. You can use a slide deck as a presentation. Slides are easier to share on a screen to a large group or in a web conference.  This will force you to focus on keeping instructions clear and concise.

3. You can update slides quickly. Writing the guide is half the battle, editing is the other half. Whether it’s new controls, changing regulations, or an updated version of your equity software, this can alter the steps in your process.  Working with slides makes it easy to add, delete, or shuffle sections.  Even reorganizing items within a slide is easy since many items only need to be dragged and dropped.

4. Building strong documentation conveys organization, efficiency and care. You’ll leave a positive lasting impression with your client with your attention to detail, knowledge of useful applications and a user guide that can be updated quickly.

-Nate Tang, Equity Compensation Consultant, Stock & Option Solutions, Inc.

SOS Service Plug: SOS True Stock Plan Outsourcing

With experience with every system, our team is confident, knowledgeable and dedicated to being your partner every step of the way. 

What we do for you:

● We free up your valuable time, allowing you to focus on the things only you can do to help your business.

● We are accountable. Each member of the team is accountable to you as well as each other, working as a unit to provide your business with the best service.

● We are specialized. We know every facet of stock plan administration.

● We are high performing and focused. Full attention is given to every detail to ensure accuracy and auditability.

● We help reduce risk by keeping up with industry trends, rules, and regulations.

● We have a reliable system and structure. Why reinvent the wheel? We have been doing this since 1999 and are a well-oiled machine.

Thinking about it? Want more info? Check out these resources below, and we’d be happy to jump on a call with you to answer any questions you may have and to help you get back to your full-time job. 

Watch a quick video on how it all works

Read an article on how the SOS Outsourcing Team can take on your ESPP!

Check out the SOS True Stock Plan Outsourcing page on our website

SOS Front & Center: Kathryn Randall, CEP

Kathryn started her career in stock administration 20 years ago and has worked with a wide variety of small and midsized companies. She has extensive knowledge in all aspects of stock administration, from IPO preparation to ASC 718, from employee communication to data integrity in software systems. Kathryn earned her CEP designation in 2002 and currently works with Stock & Option Solutions.

Here’s what Kathryn’s clients are saying about her:

“Katherine has a “can do” attitude. She dove right into the job and proved she can handle all aspects of stock administration with ease, knowledge and skill. Her attention to detail is incredible and she loves a good puzzle to solve. I was out unexpectedly and Katherine stepped right up and took the reins getting everything done efficiently and effectively. Katherine is a pleasure to work with and an asset to any company.”  -Terry L. Piccolo, Stock Administration, Cloud Based Software Provider

“I have known Kathryn for one year in my capacity as Sr. Manager for Global Stock Administration at [Cloud Based Software Provider]. Kathryn managed the administration of our global equity plans during a complicated transition period and excelled in the role. She exhibits the highest levels of productivity while consistently maintaining high standards for quality and accuracy. Kathryn possesses the ultimate "can do" attitude while taking on all tasks with a positive energy and a smile. Her upbeat personality and engaging personal style enable her to interact effectively with employees and cross-functional colleagues. She is very well organized and proactive, and takes initiative to go beyond the expected parameters of her job.”  -Sharon Orlando, Sr. Manager Global Stock Administration, Cloud Based Software Provider

Across Our Desk

An argument for everyone having an office window……. 

Another tech giant brings cash back onshore.  Who is it and what will it be used for?

After conquering e-commerce, the auto industry and aerospace, what is Elon Musk taking on now?  Click here to find out. 

Career development can keep employees with a company.  But how does the company get started on the road to career development?

Help support our old friend’s family during this difficult time... https://lnkd.in/gf8rW5x

A loss of $92 billion for corporations? 

Merger of two tech titans blocked due to national security concerns.

SOS Xposé

...tender tidbits about people and players in our industry...

A fresh start… Emily Del Toro is the new Head of Executive Compensation and Equity for Atlassian.  Juanita Medina is a Senior Stock Administrator for Synaptics Incorporated. Jonathan Brooks is a Senior Business Development Manager for E*TRADE.

She said yes! … SOS’s LoAn Nguyen is newly engaged to Kurtis Kloosterman. They plan to wed early September on a cruise to the Bahamas. We’re so happy for this cute couple.

Vacationing… Barbara Baksa of The NASPP just returned from her annual spring training trip, where she and her husband had seats six rows back behind home plate. The A’s scored five runs with two outs in the bottom of the ninth to tie things up against the White Sox, how exciting! They also visited Tucson and Bisbee, AZ, check out this cool pic! SOS’s Vanessa Harrison and family “Goofing” around at Disney’s Aulani Resort in Kapolei, HI.

Industry News… SOS has a top local stock plan administration consultant who just came off assignment and is available in the Bay Area. Schedule a call today  to let us know if you have a vacancy, short-term project, vacation coverage needed or any other need we can assist with. The CEP Institute is recruiting for a new Director. See here for the job posting. The NASPP has a snazzy new website! The NASPP also has new chapter presidents.  Michael Hayes of Brighthouse Financial for the Carolinas Chapter and Alana Miller of Solium for the Florida Chapter. The 26th Annual NASPP Conference is headed to sunny San Diego!  The Conference will be held from Sept 25-28; register by April 13 for the early-bird discount.  SOS is looking to hire a Financial Reporting and Accounting Manager who will lead a cross-functional team on multiple FRA client assignments, including month-end, quarter-end and year end period close. For a full job description contact Carole Dubas.

SOS’s newest team members…

Benjamin Needham, People Solutions Team

David Hanes, Outsourcing Team

Karol Peake, Outsourcing Team

Jarmaine Betts, Outsourcing Team

From the SOS Library Mobility-Does It Scare You?

From the SOS Webcast Archive… IPO Success Strategies

Stock & Option Solutions Logo


SOS Xtra Editor: Shawna Casey
Did you miss an issue of Xtra? View our complete newsletter archive from our website here.
Miss a webcast? You can find links to recordings, as well as the materials, on our webcast page.


Information provided in this newsletter is designed for educational and entertainment purposes only and is not provided as professional service or advice. Moreover, this newsletter should not be relied on as legal, accounting, auditing, or tax advice. Anyone reading this newsletter should not act upon this information without seeking professional counsel and/or input from their advisers. The preceding information does not necessarily represent the official views of Stock & Option Solutions, Inc. with respect to any of the issues addressed.

Summary:

An IPO is one of the biggest events in equity. But there are so many areas where something could go wrong at a time of high visibility. However, with the right preparation, an IPO can be a seamless event for the company/employees and time for the equity department to demonstrate preparedness and professionalism. Looking for tips on how to prepare? Join SOS’s Sorrell Johnson and Certent’s Michael Mauro to hear them discuss the strategies employed in successful IPOs and how you can use them to make your IPO a smashing success!

Webcast Materials

Speakers:

(One hour of Certified Equity Professional continuing education credit is available for attending. See the CEPI website for more information on CEP continuing education requirements.)

Have a question about this webcast?

For  inquiries call our office at (408) 979-8700

Or feel free to email your questions to Info@sos-team.com

Receive News About Our Next Webcast

Summary:

In this webcast, our experts share their best practices for successfully hiring the right equity compensation professional for the job. Attendees will walk away with strategies for assessing team needs, ideas for evaluating interviewees, strategies for negotiating compensation, approaches for integrating new hires to create team synergies and more.

Webcast Materials

Speakers:

 

Have a question about this webcast?

For  inquiries call our office at (408) 979-8700

Or feel free to email your questions to Info@sos-team.com

Receive News About Our Next Webcast

Ringing in the New Year, in November!

In this season of giving thanks, everyone is thankful for their year-end checklists. Prepping for year-end doesn’t begin with the champagne corks popping on December 31. For those of you who haven’t started thinking about year-end yet, we are providing a few items below for which you should give thanks:

  • 1. Be thankful for payroll audits: If you aren’t on a quarterly or monthly audit schedule with payroll, start now. It will save you much needed time at year end.
  • 2. Be thankful for your 6039 providers: Even if you have a December 31 ESPP purchase, engage them now so that everything runs smoothly once you have your complete 2017 data set. If you don’t have a 6039 provider, get one now!
  • 3. Be thankful for 1099s: Start pulling together the information now for the 1099s your company needs to send in January.
  • 4. Be thankful your ESPP transfer restrictions. Be thankful your plan states that employees have to keep their ESPP shares at the captive broker. What? Your plan doesn’t have a transfer restriction? Then get those surveys out before the turkey thaws out. (And don’t forget, transfer restrictions may not apply to your executives. You may need to do some checking up on those shares!)
  • 5. Be thankful for collaboration: Make sure you are reaching out now to other departments to understand their year-end deadlines.

Have a wonderful holiday season and Xtra will see you in 2018!

We are thankful for Excel tips! Aren't you?

The Life of an ISO

In this installment of SOS’ Beginner’s Equity Series, we are discussing Incentive Stock Options. Section 422 Qualified Incentive Stock Options are sometimes referred to as an “ISO” or “qualified option.” These equity instruments are very popular with private companies. This article will step you through the overview of the life of an ISO.

Grant:  The eligible employee is granted an ISO, which is approved by the Board of Directors or any authorized sub-committee of the Board.  ISOs are generally only granted to US employees, due to the fact that their tax benefits do not apply in non-US countries.

If the ISO is granted to a Section 16 reporter at a publicly traded company[i], Legal will disclose the terms of the ISO on a public filing (Form 4) due two days after the date of grant.

There is a limit on the number of shares that can be granted as an ISO.  Only $100,000 worth of shares may vest each year under an ISO and the Fair Market Value on the date of grant (which is generally also the exercise price) is the measurement for the $100,000 limit.  For example, if a company grants Employee A an option for 100,000 shares that vest 25% each year when the Fair Market Value is $1 per share, the grant would be count as $25,000 each year for the next four years toward the employee’s $100,000 limit.  (25,000 shares vesting each year at $1 per share.)  It is important to note that the grants are cumulative.  When Employee A receives another grant during the next four years, any shares that vest will be added to the $25,000 that counts toward the $100,000 limit.

Vest:  At vest, there is no taxable event for the employee.  The taxable event generally occurs at sale.

Exercise:    No Federal or state taxes are due at exercise[ii] (except in Pennsylvania).  Accounting/Treasury reconciles the bank account to ensure the correct amount of money was received from employees for the option cost (shares exercised multiplied by the exercise price) and deposits the purchase funds into the company’s general account.  No payroll reporting is required unless taxes were withheld in Pennsylvania.

Employees may have any of the below listed choices regarding payment of the exercise price at exercise.

  • • Electing to have enough of the shares sold on the open market to cover the option cost. The broker then remits the funds to the company.  This election is usually available only to publicly traded companies.
  • • Electing to have all of the shares sold on the open market. The broker then remits the funds to cover the option cost to the company and gives the employee the remainder of the proceeds.  This election is usually available only to publicly traded companies.
  • • The company withholds shares in value equal to the amount of the option cost and deposits the remainder of the shares in the employee’s account. This is called either “withholding shares” or “net settlement”.

An employee may be allowed to “early exercise” (exercise the option prior to the shares vesting).  Check your plan and option agreement to see if it specifically indicates that early exercise is allowed.  If the plan and option agreement make no mention of allowing early exercise, then it is not permitted.

Legal will report the exercise of the ISO on a Form 4 filing within two business days of the exercise date, if the company is publicly traded.

Share tracking after exercise:  Since the taxable event for most US employees occurs at sale of shares acquired under an ISO, it is vital to track the sale of shares for US employees.  If shares are sold within the required holding period (two years of the grant date and one year after the exercise date), this is called a disqualifying disposition.  The amount of gain reported by the company on the employee’s W-2 is the lesser of:  (1) the difference between the exercise price and the fair market value on the date of exercise or (2) the difference between the exercise price and the sale price.

Once Sale information is received, Stock Administration uploads this information into the stock administration system and generates a report for Payroll.  Payroll includes the information on the employee’s Form W-2, but does not withhold taxes from the employee’s paycheck.

If the employee holds the shares and sells after the holding period requirements have been met, the entire gain or loss on the transaction is long term capital gain or loss.  There is no tax withholding obligation on the company’s part.[iii]  This is called a qualifying disposition.

Tax implications for the company:  When the company tracks disqualifying dispositions and reports them on the employee’s Form W-2, they are entitled to a corporate tax deduction in the amount of compensation they report on behalf of the employee.   The Tax Department will request reports from Stock Administration regarding the amount of disqualifying dispositions on a regular (monthly, quarterly or annually) basis to estimate the tax deduction for the year.

Stock Based Compensation Expense:  At grant, Finance will start calculating and disclosing expense (in the financials) until either the ISO is forfeited (due to employee termination) or the ISO is fully expensed.  The expense can be calculated a by different methods, but the most popular is the use of an option valuing model called the Black-Scholes model.  No matter what model is used, Accounting Standards Codification Topic 718, Stock Compensation states that the following factors should be taken into account when calculating the expense of an option:

  • • The option’s exercise price;
  • • The option’s expected term or life;
  • • The fair market value of the company’s stock;
  • • The volatility of the company’s stock;
  • • The dividend payment of the company’s stock; and
  • • The risk free interest rate.

Company’s US reporting obligations[iv]The company reports the income from a disqualifying disposition on the employee’s Form W-2 for the year of sale.   The Company does not have to report qualified dispositions on the employee’s Form W-2.

The company is also statutorily obligated to make additional reporting.  Under Internal Revenue Code Section 6039, the company must provide a statement to the employee regarding certain details of the exercise(s)[v].  The statement(s) must be mailed no later than January 31 of the calendar year following the year of the exercise(s).  Additionally, the company must also transmit electronically this information to the IRS by March 31 of the calendar year following the year of exercise(s).

Option Expiration:  An option is no longer outstanding if:

  • • It is fully vested and fully exercised;
  • • The life of the option passes and it expires without being exercised; or
  • • The option’s life is terminated due to the employee no longer providing service to the company.

We hope you have a better understanding of Incentive Stock Options.  Find a topic you’d like to see in this series?  Contact us at xtra@sos-team.com.


[i] Section 16 reporters:  Section 16 of the Securities and Exchange Act of 1934 regulates the trading of company securities by key corporate insiders.  These insiders will usually be the entire Board of Directors, the CEO, CFO, General Counsel and others deemed to have broad decision making power in the company.

[ii] For some employees, Alternative Minimum Tax (“AMT”) may be due in the year of exercise, unless the stock is sold in the same calendar year.  A full discussion of AMT is too complex to be addressed here, but to greatly simplify:  if the taxes regularly due on a Form 1040 under the applicable exemption amount are less than the taxes due as calculated on the amount subject to AMT (difference between the fair market value on the date of exercise minus the exercise price), the employee must pay the amount of taxes due under the AMT calculation.  This is highly technical tax information which is also highly personal depending on the employee’s financial status.  The company may want to warn the employee that AMT may apply, but not attempt to educate the employee in detail.  The company is best served by referring employees to their personal tax advisers prior to making any stock plan transactions.  As of October 2017, current tax reform under congressional consideration includes a proposal to abolish AMT.

[iii] A qualifying disposition is a sale that occurs after satisfying the holding period (two years from the grant date and one year after the exercise date).  No taxes are withheld by Payroll at sale - the employee reports sales and pays taxes on the Form 1040 for the year in which the sale occurred.

[iv] International reporting obligations vary from country to country.  This document only addresses IRS reporting obligations for US taxpayers.

[v] This form is called a Form 3921 and must include the name, address and employer identification number of the company issuing the shares, the name, address and social security number of the employee purchasing the shares, the grant date, the exercise date, the price paid per share, the number of shares exercised and fair market value of the company’s stock on the exercise date.

Upcoming Equity Compensation Webcast

Our webcasts cover high-priority equity compensation topics

SOS Educational Webcast: Hire Away: Top Hiring Tips for Your Equity Comp Dept.

Tuesday, December 12, 2017 11:00 AM PST

Description: 

In this webcast, our experts will share their best practices for successfully hiring the right equity compensation professional for the job. Attendees will walk away with strategies for assessing team needs, ideas for evaluating interviewees, strategies for negotiating compensation, approaches for integrating new hires to create team synergies and more. Don’t miss this!

Speakers:

Andrea Best, Ph.D., Stock & Option Solutions, Inc.

Marianne Friebel, CEP, Dolby Laboratories


(One hour of Certified Equity Professional continuing education credit is available for attending. See the CEPI website for more information on CEP continuing education requirements.)

Meet your friends out on the slopes this ski season and let SOS step nimbly into your shoes while you're gone.

SOS Service Spotlight: 6039 Services & Solutions

The end of the year is busy enough. Let SOS take 6039 reporting off your plate.  From e-filing your 3921s & 3922s to mailing year-end participant statements, we do it all.

Why SOS?

Stock Plan Professionals – Once you have signed up with SOS, your 6039 project will be overseen and executed by SOS using processes developed and refined by SOS and utilizing technology developed by SOS. When you outsource to us, we outsource to no one.

Data Security and Integrity – The data necessary for 6039 reporting is extremely sensitive, and we treat it that way. Data transferred to SOS is heavily encrypted, and then handled entirely behind our firewall. We also thoroughly audit your files to catch most data issues before they end up on your participants’ statements, allowing you to avoid a costly and time-consuming correction process.

Experience – SOS was first-to-market with a complete 6039 solution, and has led the way ever since. We have serviced over 200 companies, mailed over 1 million participant statements, and have never missed an IRS deadline. Our clients trust our experience, and have been working with us since 2010 to meet this requirement.

SOS 6039 Services and Solutions:

● 3921/3922 statement creation

● Fulfillment/mailing

● E-filing

● Multi-year discounts available

● TIN Matching

Contact us today to learn more.

408.979.8700

We've got an app for that!

SOS Front & Center: Tonya Epps, Director, Outsourcing Operations

Tonya began working in equity compensation in 2002 and currently works from our SOS Nashville office as our Operations Outsourcing Manager. She has worked closely with privately held and public companies, holds a BA in Finance with emphasis of Investments from Middle Tennessee State University and she received her CEP Designation in 2014. Tonya has also spoken at local and national industry events including the Annual NASPP Conference.

Here is what some of Tonya's clients are saying about her:

"Tonya is great. I would retain SOS just to get to work with her. Efficient, prompt, accurate and friendly." -Brad Serwin, Glassdoor

"Tonya is a great resource to have on the SOS team. She responds promptly to all inquiries and is extremely knowledgeable when it comes to equity administration and tax implications. If she is unaware of an answer, she will research the topic to get you an answer. We are really happy to have Tonya’s expertise and great customer services on our account!" -Sukhi Thethy, Aimmune Therapuetics

"I have been working with Tonya Epps since mid-2015. We engaged the consulting services of SOS shortly after our IPO. Tonya is extremely knowledgeable about her work and a great source of information whenever I have a question. She is also incredibly responsive and replies quickly, even if she doesn’t have an answer immediately. It is nice to have confirmation that your needs are being addressed. I had the pleasure of meeting her in person at a conference last year and she is just as pleasant in person as she is over the phone and email. I very much enjoy working with her." -Tammy Buckley, aTyr Pharma

"Tonya has been absolutely great to work with! Over the last 12 months, she has shepherded my team through various critical issues including onboarding a new HR team to our plan process, retiring a previous plan and implementing a new plan. She has also been instrumental in the administration of our plan as we moved to the OTC market. If she doesn’t know the answer, she will reach out to find it within her network. She is always willing to help and does so with a great attitude and the highest level of customer service. As someone new to administering stock plans, Tonya was invaluable to me as I transitioned into my new role within Amplify last year. Tonya is a business partner in the truest sense of the word and I feel very fortunate that she is part of my team." -Kim Evans, Amplify Energy Corp.

Across Our Desk

Tax Reform Troubles for Equity Comp…Baker McKenzie covers significant impact of bill on equity compensation…at the myStockOptions.com blog, Opportunities and Surprises…A nice overview of the the law’s potential impact at the NASPP Blog…and an obituary for equity compensation from Dan Walter.  We encourage you to get involved and be heard on this very important topic.

On the other side of the pond, stock options get a potential boost in Ireland

(non) Forfeiture of unvested equity compensation covered in recent court case.

More interesting research coming out of Fidelity: Employees less likely to raid retirement savings if they buy stock in an ESPP.

Executive comp corner…Equity plan share reserves: How to increase its life expectancy…Michael Melbinger covers ISS Changes for 2018.

Finally, some scenes from NASPP, courtesy of the NASPP Blog.  Congrats on another great conference this year.

SOS Xposé

...tender tidbits about people and players in our industry...

Working hard from a new desk… Dee Crosby left the Bay Area after more than 30 years to move to Arizona to work as the US Client Education and Engagement Lead at Solium. Aimee Serna is a Sr. Stock Administrator at AMD. Jessica Castro is a Sr. Equity Compensation Consultant for Mulesoft. Robin Silke is now a Field Client Service Manager for Charles Schwab. Bobbi Miller is a Stock Plan Administrator for Talend.

All ready… Achaessa James of Equity Plan Solutions, LLC has finally opened the first two apartments of her guest house in San Miguel de Allende.  You can see photos here and she wants you to come visit soon!

On the mend… Elizabeth Dodge, of Equity Plan Solutions, LLC, had hip surgery to repair a tear in her labrum on October 25th. This is the same surgery that ARod had, because clearly, equity compensation is just as physically taxing as the MLB. She is recovering nicely and should be back to her hobby of ref’ing youth soccer in a few months.

Industry News… Certent, a leading provider of equity compensation solutions, recently announced an enhanced collaboration with Charles Schwab.  The new integration alleviates the manual data management processes for equity plan administrators and provides participants with simplified access to brokerage services. Read more here. Baker McKenzie shares an urgent alert on a Significant Impact on Equity-Based Compensation Under Proposed Tax Reform Bill.

SOS’s newest team member…

Jim Lecher, People Solutions

From the SOS LibraryYear End Communications

From the SOS Webcast Archive...SOS Educational Webcast: The End is Near: Preparing and Checking your Year-end List (Twice!)

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SOS Xtra Editor: Shawna Casey
Did you miss an issue of Xtra? View our complete newsletter archive from our website here.
Miss a webcast? You can find links to recordings, as well as the materials, on our webcast page.


Information provided in this newsletter is designed for educational and entertainment purposes only and is not provided as professional service or advice. Moreover, this newsletter should not be relied on as legal, accounting, auditing, or tax advice. Anyone reading this newsletter should not act upon this information without seeking professional counsel and/or input from their advisers. The preceding information does not necessarily represent the official views of Stock & Option Solutions, Inc. with respect to any of the issues addressed.

Stock & Option Solutions

Stock & Option Solutions Hosts SOS Educational Webcast: RSU Base Camp—Your Staging Area for the Climb Ahead

August 1, 2017

The Ins and Outs of Restricted Stock Units for Members of the Equity Field

CAMPBELL, Calif. - August 1, 2017 -Stock & Option Solutions (SOS), a leading provider of stock plan outsourcing, temporary staffing and professional services, today announced their upcoming webcast, "RSU Base Camp—Your Staging Area for the Climb Ahead" is scheduled for August 31st, 2017 at 11am PDT.

Tim McCleskey from Stock & Option Solutions and Carrie Kovac from E*TRADE Financial Services will take you back to the basics with this presentation designed to help those who might be new to the Equity field, those who interact with stock administrators, or those who just need to get a refresher on these popular equity vehicles.

RSUs are among the most widely used types of grants right now, and knowing what is involved, who is affected, and what to plan for can help you conquer many of the mountains in your day-to-day equity climbs, all from the comfort of your office or cubicle.

McCleskey states, "Restricted Stock Units are everywhere these days, providing companies with a pretty simple way of rewarding employees and engaging them in the performance of the company at the same time. Whether you're in HR, Payroll, Tax, Accounting, or Stock Administration, you will be interacting with other departments and probably even other employees about these RSUs, and it will help you to know how they impact everyone. Carrie and I will be bringing you back to the basics, so that you can be equipped for your next grant, vesting, or even an employee question!"

For more details on Aspirations, please contact Shawna Casey at scasey@sos-team.com or 408-979-8700.

Stock & Option Solutions (SOS) has built a team of extremely qualified and dedicated professionals for the outsourced management or staffing of your stock plans and special projects. SOS’s Stock Plan Outsourcing Solution is the most comprehensive outsourcing service in the marketplace, making the choice easy. Beyond our total outsourcing solutions, we are focused on helping companies like yours through challenging steps with temporary staffing, permanent placement, expert project resources, and high level project management. Call us today at 408.979.8700 to learn more or visit us online at www.sos-team.com.

Contact a Sales Representative Directly

Scott McDonald, Director, Sales & Marketing
(408) 979-8715
smcdonald@sos-team.com

Michael McDonald, Associate Director, Sales
(408) 385-8773
mmcdonald@sos-team.com

Ryan Moore, Associate, Sales & Marketing
(408) 385-8772
rmoore@sos-team.com

 

 

 

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Stock & Option Solutions

SOS Announces Aspirations Fling with Fidelity Stock Plan Services

August 1, 2017

 

This Aspirations Fling with Fidelity is a must-attend event that will give attendees insight on steps to take when moving from a private company to a public company

Campbell, California, August 1st, 2017 - Stock & Option Solutions (SOS), ), a leading provider of stock plan administration, management and consulting services, today announced an Aspirations Fling—a meeting geared towards private companies that provide equity compensation. This afternoon cocktail reception will address the key issues pre-IPO companies need to be aware of when becoming public. The panel will also discuss the prevalence and design of ESPPs launched with IPO, as well as a general industry overview of today’s ESPP landscape.

This Aspirations Fling with Fidelity Stock Plan Services will bring together executives and stock plan staff from finance, accounting, HR, legal, and executive compensation on August 31st, 2017 at 100 California Street, Suite 1200 in San Francisco, California.

“For private companies that are planning to go through an IPO and can see an ESPP implementation on the horizon, time is of the essence. It’s imperative to coordinate and roll-out equity programs in a very compressed time frame under intense scrutiny. Don’t miss the pitfalls to avoid on the road to an IPO and highlights of ESPPs: the design, the implementation and what industry leaders are doing. This Aspirations Fling will help point you in the right direction,” said scheduled presenter, Sorrell Johnson, CEP, of SOS.

For more details on Aspirations, please contact Shawna Casey at scasey@sos-team.com or 408-979-8700.

Stock & Option Solutions (SOS) has built a team of extremely qualified and dedicated professionals for the outsourced management or staffing of your stock plans and special projects. SOS’s Stock Plan Outsourcing Solution is the most comprehensive outsourcing service in the marketplace, making the choice easy. Beyond our total outsourcing solutions, we are focused on helping companies like yours through challenging steps with temporary staffing, permanent placement, expert project resources, and high level project management. Call us today at 408.979.8700 to learn more or visit us online at www.sos-team.com.

Contact a Sales Representative Directly

Scott McDonald, Director, Sales & Marketing
(408) 979-8715
smcdonald@sos-team.com

Michael McDonald, Associate Director, Sales
(408) 385-8773
mmcdonald@sos-team.com

Ryan Moore, Associate, Sales & Marketing
(408) 385-8772
rmoore@sos-team.com

 

 

 

Fill Out This Form to Receive Our Next Press Release

Continuing Education's Best Offerings

Looking to get out and network with peers this summer? Want to catch up on continuing education? Anxious to hear the latest on industry hot topics? Check out these upcoming events:

July 31-August 1, 2017:  Second Annual CEPI East Coast Symposium in New Brunswick, New Jersey

August 24, 2017:  Atlanta NASPP chapter meeting and San Francisco NASPP chapter meeting

August 31, 2017:  SOS Aspirations Fling with Fidelity in San Francisco

September 12, 2017:  Philadelphia NASPP chapter meeting

September 13-15, 2017:  GEO’s NECF conference in Rancho Palos Verdes, California

September 14, 2017:  Houston NASPP chapter meeting and Atlanta NASPP chapter meeting

September 21, 2017:  Twin Cities NASPP chapter meeting

September 28, 2017:  Los Angeles NASPP chapter meeting

October 11, 2017:  Houston NASPP chapter meeting

October 17-20, 2017:  25th Annual NASPP National Conference, Washington, DC.

Stuck in the office?  No problem, you still can take advantage of webinars!  NASPP and GEO members are spoiled for choice in the webcast archives.  The SOS webcast archives are free to all and located at: SOS webcast library.  If you want to listen live, on August 31, 2017, SOS will broadcast: SOS Educational Webcast: RSU Base Camp - Your Staging Area for the Climb Ahead.

Check out our new spin-off whitepaper!

We've teamed up with Aon Equity Solutions for a two-part spin-off whitepaper.

Our whitepaper covers the administration impact of employee equity awards in a spin-off, while  Aon's explains the valuation and accounting considerations for employee equity awards.

The Life Cycle of the "Units" (Restricted Stock Units):

A lot of attention is given to complex equity topics.  But what about the basics?  We are going back to basics with a series of articles entitled the “Beginner’s Equity Series” and are scheduling beginner’s webinars in August (Restricted Stock Units) and October (Options and Employee Stock Purchase Plans).  Please drop us a line if you would like to see any other topics included in the Beginner’s Equity Series.

In Part I of our Beginner’s Equity Series we are covering Restricted Stock Units (“RSUs”).  Please note that this a very high level view of RSUs and is not meant to cover every detail regarding these types of equity instruments.

Grant:  The Board of Directors or an authorized committee grants the number RSUs and the time based vesting schedule.  A restricted stock unit represents a number of shares to be issued later to the employee.  Usually under equity plans one (1) restricted stock unit will be redeemed for one (1) share of the company’s common stock.  Additionally, RSUs normally have no “exercise price” unlike options.  RSUs can be granted to employees or non-employees, US or non-US residents[i].

If the RSUs are granted to a Section 16 reporter at a publicly traded company[ii], Legal will disclose the terms of the RSUs on a public filing (Form 4) due two days after the date of grant.

Vest and Release[iii]:   At release the RSUs are converted to shares of common stock.  This event can be called by one of several names:  vesting, release or lapse, although some systems may refer to this as an exercise due to system capabilities.

The full value of the shares released (market value multiplied by the number of shares released) or gain becomes taxable to the employee (Federal, State, Social Security, Medicare taxes are due)[iv].   Unlike stock options, the employee has no choice regarding the timing of this income and the release of the shares.

Payroll provides Stock Administration the year to date taxes for each employee along with the appropriate state and local tax authorities, and Stock Administration calculates taxes, collects taxes and releases shares to employees, usually into the employee’s brokerage account.  Employees may pay taxes by several methods:

● Electing to have enough of the shares sold on the open market to cover the taxes due. The broker then remits the funds to the company.  This election is usually available only to publicly traded companies.

● Electing to have all of the shares sold on the open market. The broker then remits the funds to cover the taxes to the company and gives the employee the remainder of the proceeds.  This election is usually available only to publicly traded companies.

● The company withholds shares in value equal to the amount of taxes due and deposits the remainder of the shares in the employee’s account. This is called either “withholding shares” or “net settlement”.

● Electing to allow the company to withhold money from their paycheck(s).

● Electing to write a check payable to the company for the amount of taxes due.

Accounting/Treasury reconciles the corporate bank accounts to ensure tax monies are collected.  Payroll pays the taxes collected over to the federal, state and local tax authorities and reports the taxes collected and gain on the release on the employee’s Form W-2.  The RSU taxes collected are subject to the same submission deadlines as taxes collected on stock options at exercise.  The taxes are due within 48 hours of vest/release, if the total Federal tax amount due from the all of the day’s stock transactions total $100,000 or more.  If the day’s taxes do not total $100,000 or more, Payroll may turn over the taxes on the next regularly scheduled payroll.

If the release is for a Section 16 reporter, Legal may need to report the information in a public filing two days after the release date. While vesting alone does not trigger a filing, the type of tax payment may.

Finance reports in the 10-Q/K information about the releases.  This process is repeated until all of the RSUs released or the RSUs are cancelled (most likely due to employee termination).

Share sale tracking after release:  Since the taxable event occurred at vest/release, there is no need to track the sale of shares for regular employees.  Sales must be tracked for Section 16 reporters, as they must be publicly reported two business days after the sale. 

Tax implications for the company:  Generally, when the company reports income on behalf of the employee at vest, the company is able to take that income as a tax deduction on corporate tax returns.

Stock Based Compensation Expense:  Finance will start calculating and disclosing expense until either the RSUs are forfeited (due to employee termination) or the RSUs are fully expensed.  The expense of RSU grants is much easier to calculate than that of stock options.  The expense per share for an RSU is the fair market value on the date of grant.  If the company issuing the RSUs pays dividends, the expense per share is reduced due to expected dividend payments.

Company’s US reporting obligations[v]Once the company reports the income and taxes paid on the employee’s Form W-2, they are not statutorily obligated to make any further reporting.  As a courtesy, most companies do send a statement at year end to the employees that vested during the year, detailing the transaction.

Looking for more RSU information?  Join Tim McCleskey and Carrie Kovac on August 31 for the webinar:  RSU Base Camp - Your Staging Area for the Climb Ahead.  Join us in the next issue of Xtra for Beginner’s Equity Series:  Stock Options.


[i] If the plan and local securities law permit.
[ii] Section 16 reporters:  Section 16 of the Securities and Exchange Act of 1934 regulates the trading of company securities by key corporate insiders.  These insiders will usually be the entire Board of Directors, the CEO, CFO, General Counsel and others deemed to have broad decision making power in the company.
[iii] For purposes of this discussion, we will assume that the vest date and release date are the same date.  Sometimes they are not, if the plan/grant allows the release date to be deferred to the employee’s choice of dates.  This is an advanced topic in equity education.
[iv] Non-Employee Board of Directors and Non-Employees are not subject to tax withholdings.  The company is required to report income from the gain on a 1099-MISC at year end.  For Non-US participants, taxes may be due at exercise or possibly at grant or vesting depending upon country tax laws which is outside the scope of this document.
[v] International reporting obligations vary from country to country.  This document only addresses IRS reporting obligations for US taxpayers.

Pre-IPO Meeting and Reception in San Francisco-Earn CEP & CPE Credit

Aspirations Fling with Fidelity

August 31, 2017 | 3:00pm-6:30pm | 100 California Street, STE 1200 San Francisco, California 94111

And the Survey Says...

In the March 2017 Xtra, SOS conducted a quick survey of its readers regarding the new accounting guidance in FASB ASU 2016-09[1] that was issued in March 2016. Below are some of the key takeaways from the survey:

● Approx. 73% of respondents indicated their intention to wait until they were required to adopt ASU 2016-09. For public companies with a fiscal year end in December 2016, that adoption date was January 1, 2017. The remaining 27% of respondents did not hesitate to take advantage of ASU 2016-09 and early adopted the new guidance. The primary reason for early adopting was to remove the “noise” and record forfeitures when they occur using a 0% forfeiture rate vs. continuing to estimate forfeitures. As for the 73% of respondents who told us they did not early adopt, they have some Form 10-K and Form 10-Q footnote examples to look at before making their decisions on how to apply the new guidance.

● Another item to be mindful of is the “maximum statutory rate” withholding amendment for companies that allow net share settlement. Triggering liability accounting is no longer an issue if the withholding is under the “maximum tax rate” in the respective jurisdiction. But keep in mind, the IRS tax rules did not change because of these accounting rules. Don’t worry too much though, with the FASB release of simpler Modification Accounting rules in May 2017[2], amending the equity plan documents for this tax withholding change should not trigger modification accounting. Even the two major U.S. stock exchanges, NASDAQ and NYSE, have both indicated this change in the tax withholding language would not be a material amendment to the plan and thus not require shareholder approval. Nonetheless, please consult your accounting, tax and legal advisors before taking any action.

Hopefully we’ll get some good news on the FASB’s proposal to simplify the Non-Employee Share-based Accounting rules[3]. If you haven’t already, check out the comment letter we submitted.

Bill Storey, CPA,
Manager, Outsourcing Services,
Stock & Option Solutions, Inc.


[1] FASB ASU No. 2016-09, Compensation- Stock Compensation (Topic 718): Improvements to Employee Share Based Payment Accounting.
[2] FASB ASU No. 2017-09, Compensation- Stock Compensation (Topic 718): Scope of Modification Accounting.
[3] SOS Comment Letter to the FASB’s Exposure Draft, Compensation- Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.
 

Upcoming Equity Compensation Webcast

Our webcasts cover high-priority equity compensation topics

SOS Educational Webcast: RSU Base Camp - Your Staging Area for the Climb Ahead

Thursday, August 31, 2017 11:00 AM PST

Description: 

What do carabiners, chalk, and #optoutside hashtags have to do with Restricted Stock Units? Well, close to nothing, but we’re going to try anyway! SOS is taking you back to the basics with this presentation designed to help those who might be new to the Equity field, those who interact with stock administrators, or those who just need to get a refresher on these popular equity vehicles.

RSUs are among the most widely used types of grants right now, and knowing what is involved, who is affected, and what to plan for can help you conquer many of the mountains in your day-to-day equity climbs, all from the comfort of your office or cubicle.

Speakers:

Tim McCleskey, CEP, Stock & Option Solutions, Inc.

Carrie Kovac, CEP, E*TRADE Financial Services

(One hour of Certified Equity Professional continuing education credit is available for attending. See the CEPI website for more information on CEP continuing education requirements.)

Temporary Staffing

We're here when you need us

Product Spotlight: ESPP Expense Application

Expensing can be one of the more difficult aspects of administering an Employee Stock Purchase Plan depending upon your equity software and your plan rules.  Many current equity platforms limit your ability to determine ESPP expense at a participant level, handle modifications due to contribution increases or plan reset and rollover features.  Some platforms offer no ESPP expense assistance at all.

SOS has been assisting clients with their ESPP expensing needs by creating excel files that can be extremely cumbersome and prone to human error. We have used those experiences to design a more systematic approach using client source files and an Access based application to develop detailed and summarized output to support your expense needs. 

Here are some features of the SOS ESPP Expense Application:

1. Consistent client source input files
2. Automated output in Excel format for easy review
● Details on a participant level
● Summary at client specified user field
3. Modification Accounting details
● New grant expense related to contribution increases
● Incremental expense for each reset or rollover event
4. Documentation for auditors
● Application White Paper
● Output field definitions
5. Timely Reporting
● SOS will establish client calendar for each purchase period

Call us today at 408.979.8700 to learn more about the application and how SOS can help with your ESPP expense.

SOS Front & Center: Chris O'Harra

For Chris O'Harra at Coherent, the two month assignment turned into more than a nine year assignment. Highlights of that tenure include reinitiating the suspended ESPP plan, retirement of two equity plans, and implementing the issuance of both RSU and PSU grants for the first time at the company.

“I have worked with Chris on stock compensation for about 3 years and he has been great to work with. He is responsive, patient and very knowledgeable about EE reports. He did a good job on researching EE software reporting related issues, and helped our company transitioning EE from software to online version smoothly. I have relied on him to compile all EE data required for the quarterly stock compensation calculation. I highly recommend him for your project.” -Sarah Yi, Coherent

If not now, when? Call us today to discuss your needs.

408.979.8700

SOS Xposé

...tender tidbits about people and players in our industry...

Driving to a new office…Jennifer George is now a Partner at PwC. Kevin Roberts is now the Senior Vice President-Financial Advisor, Corporate and Executive Services Group at RBC Wealth Management. Cindy Birse is a Senior Stock Plan Administrator for Neurocrine Biosciences, Inc. Laura Shields has joined Symantec as a Stock Administrator, based in LifeLock's Tempe Arizona location. LifeLock was acquired by Symantec in February 2017. She joins the team based at Symantec's headquarters in Mountain View California. Pete Macias is now a Stock Administration Manager at Marvell Semiconductor. Sara Spengler is now a Director, Global Equity Administration for Fitbit. Achaessa James is now working for Equity Plan Solutions, LLC as Senior Equity Plan Consultant. Jack Tice is working for Itron, Inc. as a Sr. Compensation Analyst. Veena Bhatia is the new Head of Global Stock Administration for Atlassian.

All smiles… SOS’s Bill Storey’s daughter, Rali, is 8 months old now and sporting her SOS onesie. What a cutie!

Nashville news… Tommy Swindle of UBS Financial Services Inc. is the new president of the NASPP Nashville Chapter.

It’s a boy!... Moe Zohny of SOS and his wife are expecting their second child this October. This time it’s a boy so they will now have one of each! Jon Burg of Aon Hewitt and his wife, Cindy, are expecting their second baby (another boy) in early August!

Commenting aroundCheck out SOS’s Bill Storey’s comments to FASB on non-employee accounting.

Working together… Achaessa James of Equity Plan Solutions, LLC writes about the combined efforts it takes to make up the CEP Exam Prep Course. 

Industry News… If you coordinate your company’s option exercises and RSU releases, are your processes ready for the new T+2 settlement rules? Coming 9.5.17…. The NASPP is celebrating its silver anniversary in the city where it all began! The 25th Annual NASPP Conference will be in Washington, DC from October 17-20. Register NOW! If you haven’t seen this Global Relative TSR Plan Design survey from Aon, we highly recommend checking it out. The survey is open and accepting responses through July 28.  Everyone who completes the survey will receive a copy of the results, available in September.

SOS’s newest team member...

Colleen Ledesma, People Solutions Team

From the SOS LibraryEquity Roll Forwards

From the SOS Webcast Archive...SOS Educational Webcast: Adding Access to Your Stock Plan Professional Quiver

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SOS Xtra Editor: Shawna Casey
Did you miss an issue of Xtra? View our complete newsletter archive from our website here.
Miss a webcast? You can find links to recordings, as well as the materials, on our webcast page.


Information provided in this newsletter is designed for educational and entertainment purposes only and is not provided as professional service or advice. Moreover, this newsletter should not be relied on as legal, accounting, auditing, or tax advice. Anyone reading this newsletter should not act upon this information without seeking professional counsel and/or input from their advisers. The preceding information does not necessarily represent the official views of Stock & Option Solutions, Inc. with respect to any of the issues addressed.

Summertime is Here!

Well, not really.  It feels like tax season just ended and the evenings still have a chill in the air.  But the time to plan for summer is definitely here.  And here are some things to check off your list before summer arrives: 

 

1. Who is covering for you on your summer vacation? Are you cross training a colleague or do you need to call in coverage?

 

2. Are your procedures and checklists up to date so your coverage knows what to do and when to do it?

 

3. Read notes from Janet Bernard on Form SSA:131: Employer Report of Special Wage Payments 

 

4. Has your stock plan had its annual check-up yet? If not, take a look at some of the things you should be thinking about.

 

5. Does your payroll reporting process flow smoothly or do you need help? Check out our product spotlight: Payroll Xpress.

 

6. Are you ready to hand off HR, Payroll and Stock work to someone else? In our June webcast Vanessa Harrison, Tonya Epps and John Cunningham of Oclaro will discuss the pros and cons of outsourcing the stock, payroll and HR functions in their webcast: Questions to Ask When Considering Outsourcing

 

Dust off your flip flops and start planning, summertime is just around the corner!

Our most recent Aspirations Fling was a success!

Check out some snapshots of the event

SOS Consultant Corner: Notes from Janet Bernard on Form SSA-131: Employer Report of Special Wage Payments

I was recently contacted by an old friend, the stock plan administrator I had trained to fill my position with a former employer. She was in receipt of a request to complete Form SSA-131 and wasn’t sure what to do about it. It wasn’t on the list of regular duties I had left behind, because I didn’t – and don’t – see much of them. If you’re unfamiliar with this form, it is likely because the responsibility for completing and issuing them often falls on a company’s payroll department. Although there is no deadline for completing the form, if you receive one, it’s not something you want to casually set aside, thinking you’ll get to it later.

Form SSA-131 is used to report special wage payments (SWPs) made in the previous tax year. An SWP is an amount paid to an employee or former employee, which was earned in prior years. Take, for example, non-qualified stock options (NQs):

● An employee’s NQs vested (or, were earned) 2012 – 2016

● The employee retired December 31, 2016

● The retiree exercised the NQs in 2017

The W-2 income from the exercise would be considered an SWP; and the SWP income would be reported to the Social Security Administration (SSA) in early 2018.

The company reports SWPs to the SSA electronically (or by paper listing in some instances).  The company, of course, also reports the ordinary income from NQ exercises, and the related tax paid, on the W-2 for the year of exercise.  In some cases, as when a company is not made aware that an employee or former employee has begun receiving social security benefits and does not report the SWP appropriately, the SSA may reduce the benefits according to the wages reported on the W-2. 

For this reason, it is in the best interest of optionees that the equity team be familiar with Form SSA-131 and be prepared to issue the information timely upon request.  The form will let the SSA know that income reported on the W-2 was earned prior to receiving social security benefits.  The completed form can be sent directly to the SSA office nearest the company but is often provided to the employee who requests it so that the employee can submit it to the SSA office handling the claim.  In any case, the SSA benefits will not be reconsidered until the SSA is in receipt of the SWP details.

Because SWPs can include much more than just income from NQ exercises, it makes sense that the payroll department would be responsible for annual reporting.  However, in the interest of time, if the equity department receives a request for information, and payroll is processing that week, the equity team could manually complete a Form SSA-131.  Even a form letter from the company may be accepted:

● The form letter should include all of the elements of Form SSA-131 (name, address, SSN, date of retirement, etc.).

● The letter should state that the SWP amount being provided was related to NQs only and that the team is not aware of any additional SWP amount that might have been paid during the year in question.

● Also, if the employee still holds outstanding NQs, the letter should provide the number of NQs, exercise price and expiration date of the outstanding equity.

Please note that Form SSA-131 is not used to report non-qualified deferred compensation which is reported in box 11 of Form W-2. 

IRS Publication 957 is the best source for more information about reporting SWPs.  It can be found, with a sample Form SSA-131, at https://www.irs.gov/pub/irs-pdf/p957.pdf or https://www.irs.gov/publications/p957/index.html.

-Janet Bernard, CEP, Stock & Option Solutions, Inc.,

Equity Compensation Consultant

 

Upcoming Equity Compensation Webcast

Our webcasts cover high-priority equity compensation topics

SOS Educational Webcast: HR, Payroll or Stock: Questions to Ask When Considering Outsourcing

Tuesday, June 6, 2017 11:00 AM PST

Description: 

How do you best provide HR, Payroll and Stock Administration services for your company? If your company is very small, has employees in many locations, or is trying to cut costs, having full time on-site HR, Payroll and Stock Administration employees may not be practical or cost effective. In this webcast we will uncover the questions you should ask yourself, those around you and potential service providers to help you decide if outsourcing these functions is right for your company. Who, what, where, why and how will all be revealed.

Speakers:

John Cunningham, Oclaro

Tonya Epps, CEP, Stock & Option Solutions, Inc.

Vanessa Harrison, Stock & Option Solutions, Inc.

(One hour of Certified Equity Professional continuing education credit is available for attending. See the CEPI website for more information on CEP continuing education requirements.)

Why SOS?

Let's Get Physical: Is Your Equity Plan Healthy?

Has your equity plan had its annual physical?  For most of you, the proxy and year-end reporting is now complete, tax season is over and now is the time for you to take a look at all those items that were pushed out of the way because there wasn’t enough time.  Now is the time for your equity plan annual check-up.  

What kind of health is your equity plan in? 

● Does the plan have enough shares for the fiscal year? Ideally this is a question that would have been asked prior to proxy season.  But looking forward, is there a request for shares in the future for the next proxy?  If so, make sure to speak up now.  Actions that companies take throughout the year may trigger negative votes or cost points on the ISS scorecard. 

● Is my plan expiring anytime soon? If you have a plan that has an expiration date, what is the strategy for granting equity after the expiration date?  A new plan?  Again, ideally this question would have been asked prior to the proxy season, but remember, it never hurts to look into the future for the next proxy season. 

● How’s your data quality? In the November issue of Xtra we talked about data quality. If you have acquired another company or changed your HR or Payroll systems recently, it might be worth auditing your data for cleanliness and completeness.

● Regulatory changes: How’s your share withholding?  Most companies were excited to see that ASU 2016-09 now permitted share withholding at the maximum rate without triggering liability accounting.  For the international employee population who were traditionally under withheld, the news was especially welcome.  But wait, what does your equity plan say about share withholding?  Some plans are silent, but many specifically call out that tax withholding should be at the minimum rate like this:

“provided, however, that no shares of Common Stock are withheld with a value exceeding the minimum individual statutory tax rate in the applicable jurisdiction”.

Depending on how your plan is structured, this language may appear in more than one section.  If your company is planning on allowing for the maximum withholding rate, make sure to document each occurrence that needs to be changed and consult the Legal department on the right way to update this language.

● Documentation: are your grant agreements up to date?  Now is the time to make sure you have updated grant agreements, country specific supplements or translations for all countries.  And don’t forget to upload them to your equity software provider or broker if you are using online grant agreements!

● How old is this version of the plan? We’ve all found documents that were before our time, but sometimes you find agreements and plans from 10, 15 or even 20 years ago.  How long do you keep it?  Does the company have a records retention policy?  Generally, financial professionals advise keeping documents for 7 years, but your lawyers may want you to retain them for a longer period of time.  Check in with Legal before you start to purge paper or electronic documents.

What kind of health is your equity platform in?

All administrators know that your plan is only as healthy and effective as the equity platform that you use to administer your plan.  A tired, run down equity platform won’t contribute to the overall health of your equity plan.  Take a look at your equity platform as well and ask these questions:

● Are you utilizing all the features of your equity platform correctly? Enhancements to platforms occur regularly and because of timing, you just have not explored what those enhancements mean for your plan administration.  Now is a great time to dig deeper into these updates and learn if you are utilizing them to your advantage.  One area we always see under-utilized is the fungible share tools in some platforms. Even if the enhancement can’t handle your situation 100%, it may be able to provide more functionality than you thought.

● Are the plan shares reflected correctly within your equity platform? If you received shares in the proxy season, validate that they were added in your equity platform.  Additionally, you should validate with Legal that they were properly registered on an S-8 and the transfer agent has also been notified.

For most administrators, down time is approaching and it is the perfect chance to do a thorough equity plan check-up.  Remember this process includes not only the condition of your plan, but an equity platform check-up as well.   Finding and correcting any health related issues now will save time and improve accuracy down the road.  An ounce of prevention is worth a pound of cure!

 

Volatility Calculator Application

Detailed, auditable volatility calculation in just a few minutes

Product Spotlight: SOS Payroll Xpress

To help you avoid errors, and to help you save time, SOS Payroll Xpress has been developed to assist stock departments by instantly generating importable files and providing audit reports for review prior to loading the data into the payroll system. The application can generate the files in both CSV and XML depending on the preferred format. SOS Payroll Xpress is an MS Access application which does not require any installation. A few setup steps quickly automate the process of generating the files.

SOS Payroll Xpress Features and Benefits:

● SOS Payroll Xpress is an MS Access application and therefore does not require any installation if you already have MS Access installed. With minimal IT support this application can easily be deployed on your network.

● Since SOS Payroll Xpress is deployed at your site, data security is guaranteed. Data never passes beyond your firewall.

● Reports generated by the current equity administration platform provide the data for SOS Payroll Xpress.

● SOS Payroll Xpress currently supports standard reports from the most popular equity administration platforms.  SOS Payroll Xpress can be easily customized to support source reports from other equity administration platforms.

● SOS will assist and directly work with the client's stock administrators to implement SOS Payroll Xpress.

● Data diagnostics generated by SOS Payroll Xpress can be used to review and correct any data issues prior to uploading the data to the payroll system.

● Automatic generation of import files ensures data accuracy with no manual intervention.

● Since the SOS Payroll Xpress supports standard reports from equity administration platforms, data preparation time is limited to generating the required source reports.

Check out our SOS Solutions Webcast: Savin’ Time with Tech Tools where we review Payroll Xpress in detail.

SOS Payroll Xpress is a solution that works. Reduce your time and frustration. Call us today. 408.979.8700.

Front & Center: Juanita Medina

Juanita started working for SOS in 2004 at Foundry Networks, as a replacement for the departing stock administrator.  Foundry was so pleased with Juanita that they retained her services for several years.  When Brocade acquired Foundry in 2008, Juanita stayed to help with the transition, but Brocade found her assistance so valuable that they retained her past the merger integration and she has been there ever since.

“Juanita is an enthusiastic team player who is dedicated to her work and I’ve never met anyone like her in all my years of working. Juanita truly has an amazing work ethic and always had our best interest in mind.”

-Diana Castro, formerly Foundry Networks

“I have greatly appreciated Juanita’s knowledge on complex stock administration issues, her ability to handle tough questions from employees, and her positive attitude each day no matter what task she is handling in the moment.“

-Chris Hanson, Brocade

SOS Stock Plan Outsourcing

Full-time expertise at a part-time cost

Across Our Desk

FASB issues update on modification accounting for shared-based payment awards…If you are really into accounting, you can dig into it here.

M&A: Court questions accelerated vesting of equity compensation.

From the NASPP Blog: Trump’s tax reform planFive trends in restricted stock units.

Fred Whittlesey covers the landmines found in equity compensation in private companies.

Another reminder that director limits set forth in equity plans allow director compensation to be reviewed under more lenient business judgment rule.

And finally, something that should unite us: You would actually die without your coffee, research says.

 

SOS Xposé

...tender tidbits about people and players in our industry...

Updating profiles… JoAnne Zinman is the Senior Manager, Stock Administration for Okta, Inc. Jennifer Lim is now a Stock Administrator for iRhythm Technologies, Inc. Brianne Kostielney has joined Solium as the new Manager of Client Education in the US. She has relocated from the Bay Area down to Tempe and can’t wait for the summer heat! Rob Pawlick is the new VP, Corporate Controller for Gainsight. Jeff Graham has returned to E*TRADE handling sales in the mid-market as an Account Executive after spending the last nine years at Certent/EASi.

Head of the classSOS’s Tim Nguyen is graduating June 17th from Santa Clara University with a major in Economics. 

Earning awardsSOS’s Scott McDonald’s daughter, Savannah Louie, and her class won the St. Cecilia Academy Award in the category of Life at St. Cecilia for “We Love Our 8th Grade Buddies”.  See the video and acceptance speech featuring Savannah. Congratulations!

Taking more walks… Shawna Casey of SOS and her family recently adopted a 5-month-old puppy and named him Ranger. This Labrador and German Shepard mix is a fun addition to the family and is keeping them active! LoAn Nguyen of SOS just adopted a 2-year-old Siberian Husky named Dakota (Kota for short!). What a cute pup!

Industry News… The NASPP is celebrating its silver anniversary in the city where it all began! The 25th Annual NASPP Conference will be in Washington, DC from October 17-20. Register before June 9th for a discount!  Enhancing a long-standing relationship, Solium and UBS have entered into an agreement to offer Shareworks as the underlying software platform for UBS’ US-listed clients. Read the press release. Intuitive Surgical recently rolled out a new annual grant program that allows each employee to choose the mix of equity (RSUs and NQs) that best fits their needs and tax strategy. The Annual Nor Cal GEO Forum is set for June 15th at Devil's Canyon Brewery in San Carlos.  Last year, they sold out, so register soon if you want to join! Register now for this special one day event. The 9th Annual New England NASPP Regional Event is on July 14th and thanks to the sponsors, this event is FREE! CEP and CPE credit will be offered. Register today.

SOS’s newest team members…

Hannah Brown, Outsourcing and Sales & Marketing Teams

EJ Haggerty, People Solutions Team

From the SOS LibraryTop 10 Proxy Pitfalls

From the SOS Webcast Archive...SOS Educational Webcast: Documenting the Process: Why You Shouldn’t Rely on Memory Alone

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SOS Xtra Editor: Shawna Casey
Did you miss an issue of Xtra? View our complete newsletter archive from our website here.
Miss a webcast? You can find links to recordings, as well as the materials, on our webcast page.


Information provided in this newsletter is designed for educational and entertainment purposes only and is not provided as professional service or advice. Moreover, this newsletter should not be relied on as legal, accounting, auditing, or tax advice. Anyone reading this newsletter should not act upon this information without seeking professional counsel and/or input from their advisers. The preceding information does not necessarily represent the official views of Stock & Option Solutions, Inc. with respect to any of the issues addressed.

Stock & Option Solutions

Stock & Option Solutions Hosts SOS Educational Webcast:The Whole Enchilada: Accounting for PSUs from Top to Bottom

April 13, 2017

Navigating through the process of accounting for Performance Share Units

 
 

CAMPBELL, Calif. - April 13, 2017 -Stock & Option Solutions (SOS), a leading provider of stock plan outsourcing, temporary staffing and professional services, today announced their upcoming webcast, "The Whole Enchilada: Accounting for PSUs from Top to Bottom" is scheduled for April 25th, 2017 at 11am PT.

Elizabeth Dodge from Equity Plan Solutions, Michael Esposito from Solium, and Bill Storey from Stock & Option Solutions will walk you through the entire process of accounting for PSUs: from fair values to attribution (regular and spicy - delayed service inceptions, reverse FIN 28, and time-based vesting after goal achievement), forfeiture rates, application and true up, to tax accounting (even the impact of 162(m)), diluted EPS (when to include/exclude and other FAQs) and even disclosure reporting under ASC 718.Storey states, "Accounting for Performance Share Units or PSUs can be quite tricky. The accounting treatment is different for PSUs with performance conditions (company/individual specific metrics/milestones) and PSUs with market conditions (stock price/total shareholder return metrics). I'm looking forward to discussing this topic with Elizabeth and Michael and providing insight to those attending the webcast or catching a replay of the webcast down the road."For more details on Aspirations, please contact Shawna Casey at scasey@sos-team.com or 408-979-8700.

SOS is a leading stock administration staffing, consulting and outsourcing firm within the equity compensation marketplace.  SOS provides temporary stock plan staffingexpert project resources, and total outsourcing solutions. To learn more you can visit us online at http://www.sos-team.com or call us at 888-SOS-0199.

Contact a Sales Representative Directly

Scott McDonald, Director, Sales & Marketing
(408) 979-8715
smcdonald@sos-team.com

Michael McDonald, Associate Director, Sales
(408) 385-8773
mmcdonald@sos-team.com

Ryan Moore, Associate, Sales & Marketing
(408) 385-8772
rmoore@sos-team.com

 

 

 

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