January 20, 2017 WPAdmin

New Year Means New Tax Changes

Ringing in the New Year also means changes in tax laws that impact stock administrators. Many of you may have already heard of the changes that are here through year-end tax updates or blogs, but for those of you with your head in the sand, here are some new changes that you should note:

The ceiling on wages subject to social security contributions is rising from $118,500 in 2016 to $127,200 in 2017. The withholding rate of 6.2% remains the same. The maximum amount that should be withheld will now be $7,886.40. Make sure your equity administration system is appropriately updated.

New deadline for electronic filing of Form W-2: Employers continue to have to send out Form W-2s to employees in the mail or electronically by January 31. But now the employer also has to file these electronically with the IRS by January 31. This means it is more vital than ever to have amounts reported on the W-2 right the first time to avoid the dreaded Form W-2 C.

Form W-2 filing extension for employers is not automatic: Previously, employers could apply for, and automatically receive, an automatic filing extension on the electronic filing of Form W-2s. The extension option is still available, but the granting of an extension will be considered on a case by case basis by the IRS.

But the more things change, the more they stay the same. Some tax related stock administration deadlines and limits are not changing.

Medicare: The Medicare rates remain the same at 1.45% for the first $200,000 of taxable income and a 0.9% surcharge on any income after that threshold.

6039 Filing Deadlines. No reprieve here. The 6039 filing deadlines remain the same: 

Forms 3921 and 3922 must be distributed to employees by January 31.

The paper filing of the employer’s 6039 return is still due by February 28.

The electronic filing (FIRE) of the employer’s 6039 return is still due by March 31.

The deadline to file personal tax returns for 2016 with the IRS is April 18, 2017. Well, the regularly scheduled tax return filing deadline remains April 15. However, due to April 15 falling on a Saturday and Washington D.C.’s Emancipation Day holiday being observed on April 17 instead of April 16, 2017, Tax Day is on the following Tuesday.

Make sure you check in with your payroll department for any states who may have changed their tax rates for 2017.  And rest up, once employees receive their W-2 and 3921 and 3922 Forms, the onslaught of tax questions will begin.  Happy New Year! 

Temporary Staffing

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And the Survey Says…

Stock administrators wear many hats and do many different jobs.  SOS is frequently asked, what department should stock administration report to in a company?  In the Legal department?  HR?  Accounting?  Treasury?  The answer is that there is no right answer to this question. There is also no list of standard job duties for a stock administrator.  Some tie out bank accounts and do journal entries, while some do not.  Some are heavily involved in securities law filings both domestic and international, while others are not.  Our SOS team loves all things equity, so we asked our Xtra readers in October to tell us where they report and what their duties are and we thought we would share the results with you!

Department that owns stock administration:

Accounting/Finance:  49%

Legal:  24%

HR/Compensation/Benefits:  23%

Treasury: 4%

This breakdown is interesting considering the duties that fall under the stock administrator’s purview:

Accounting related duties:  Sending wire instructions to brokers to move proceeds from equity transactions:  30% of you are not involved in this process at all, 34% are somewhat involved in the process and 36% count this as a regular job duty.  Journal entries:  41% have no responsibility in this area, 21% are marginally involved and this is routine for 38% of the respondents.

When it comes to entering stock related items into payroll, 39% have no involvement at all, 38% are involved to some degree and 23% consider this a regular job duty.

Corporate tax related job duties don’t usually fall within the stock administrator’s realm:  With 77% having no involvement in re-charge or chargeback agreements, this is not a popular job duty among stock administrators.  16% are somewhat involved, but only 7% claim this as a primary job responsibility.  56% aren’t involved at all with preparing the corporate tax accruals, 28% are only partially involved and 16% have no involvement at all.

Legal duties of a stock administrator:  about half of stock administrators (49%) are required to draft and file Forms 3, 4 and 5.  31% are involved in the process and 20% are not involved at all.  When it comes to international filings, 30% are not involved with at all, 44% being involved in the process in some way and 26% claiming this as a regular job responsibility.

As you can see, there is really no “one size fits all” description for a stock administrator’s job.  The descriptions are as diverse as the people who make up the stock admin community!

Refresh on the ASC 718 Annual Disclosure Requirements and New Guidance Under ASU 2016-09

December 31st has arrived and another fiscal year has come to a close. It might be worth taking a step back and to re-examine annual equity compensation disclosure requirements. Whether it’s a requirement under ASC 7181, ASC 505-502 or the new guidance under FASB ASU No. 2016-093, it can be perplexing to keep up with it all.

As required by ASC 718 paragraphs 10-50-1 thru 10-50-2, there are annual minimum disclosures that companies must provide when disclosing their stock-based compensation plans. Some of this information may be repeated from the previous year or previous quarter if you kept a running tally, but it’s worthwhile to check and see if your annual disclosures are still relevant. For example, some companies are still disclosing the “Option Outstanding/Exercisable by Price” table where options are grouped by exercise price ranges (see insert below). This grouping by exercise price range was required under FAS 123 but is no longer required under ASC 718.

No longer required under ASC 718

No longer required under ASC 718

Choosing to show the exercise price ranges is left to the discretion of management and the auditors. Reducing that information may also cut down on the number of XBRL tags for those companies required to tag your footnote data under the U.S. Securities and Exchange Commission (“SEC”) XBRL rules.

What is required under ASC 718

What is required under ASC 718

Also required but not shown in the table above is information on “options vested and expected to vest at the balance sheet date”. Auditors have asked that this information be included on a separate line item between the outstanding and exercisable line items. Of course if a 0% forfeiture rate is used, the “expected to vest” info is not applicable.

Another item to note is ASC 718 permits separate disclosures for different types of equity awards that have different terms. Often times companies include all of their stock options (service- and performance-based) in one single narrative and roll forward table without distinguishing the characteristics of each award type. The ASC 718 guidance is suggesting that a narrative and share roll forward on service-based stock options should be separate from the narrative and share roll forward on stock options with performance conditions and/or market conditions. It makes it easier for the reader to understand the different types of share-based payment awards.

One final item that often is overlooked is the description of the company’s policy for issuing shares upon option exercises or unit conversion, including the source of the shares. Will new common stock be issued or will existing shares be reissued from treasury stock?

Regarding ASU No. 2016-09, new guidance was released in March 2016 and is effective for public entities for fiscal years beginning after December 15, 2016 and interim periods within those years. For all other entities, it is effective for fiscal years beginning after December 15, 2017 and interim periods beginning after December 15, 2018. Early adoption is permitted. The key takeaway is that ALL of the following items must be adopted, no cherry picking or “a la carte”:

Accounting for income taxes - Excess tax benefits/deficiencies will now be recorded in the income statement. Say bye-bye to the APIC Pool.

Statutory Tax Withholding - Employers can withhold taxes at the maximum statutory tax rate in the applicable jurisdictions and not trigger liability classification.

Accounting for Forfeitures - Companies will be able to elect as an accounting policy whether to account for forfeitures by a) continuing to estimate forfeitures under the previous ASC 718 guidance or b) recognizing forfeitures when they occur.

Diluted Earnings Per Share - Assumed proceeds from excess tax benefits will no longer be a component in calculating buy back shares under the treasury stock method.

Cash Flow Presentation - Excess tax benefits can be presented as an operating activity only. Cash paid to a tax authority when shares are withheld can be listed as a financing activity in the cash flow statement.

Nonpublic entity practical expedient to calculating expected term - Nonpublic companies without sufficient history will be permitted to use the SEC’s Simplified Method under Staff Accounting Bulletin No. 107/110 (codified in Topic 14D.2), which calculates expected term of a “plain-vanilla”4 option as the midpoint between the vesting period and the contractual term of the option.

Nonpublic entity practical expedient to using intrinsic value - For nonpublic entities that measure liability-classified awards at fair value, they can elect a one-time change in accounting principle to measure those awards at intrinsic value.

Keep in mind that various transition requirements will apply to these amendments, so consult your auditors when considering these key decisions.

SOS is prepared to assist you in preparing these disclosures. We recommend consulting with your legal, accounting and tax advisors before taking action on your disclosures.

1- ASC 718 = FASB ASC Topic 718, Compensation- Stock Compensation
2- ASC 505-50 = FASB ASC Topic 505-50, Equity-Based Payments to Non-Employees
3- ASU 2016-09 = FASB ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting
4- “Plain-Vanilla” Options as defined in SEC SAB Topic 14D.2, Share-Based Payment- Certain Assumptions Used in Valuation Methods-Expected Term

Bill Storey, CPA, Stock & Option Solutions, Inc.


And the CEO says… “Thank you to all of our incredible clients and partners with whom we have worked with over our 18 years in business. Our success is largely due to your referrals, and we are grateful for you trusting us with your friends.  Our core values of Excellence, Integrity, Opportunity, Passion and Teamwork are the essence of how we aim to live up to your trust as we continue to work together over the next 18 years."

- Barrett Scott, CEO, Stock & Option Solutions, Inc.

Product Spotlight: Equity Expense Products & Solutions

SOS offers a number of products that can make your equity expensing tasks less onerous and more audit friendly.

Are you struggling with your Employee Stock Purchase Plan Expense? Maybe you are not sure how to capture your Non-Employee expense for options and awards. Let us help you find a solution to all your equity expense accounting issues.

Here are some features of the SOS ESPP Expense Application:

•   ESPP Expensing Edge Application
      •  Available for non-modification and certain modification plans
      •  Bridges the gap left by equity administration platforms with little to no ESPP expense functionality
•   Non-Employee Expense
      •  Mark-to-market expense until vest date, straight-line or accelerated attribution
      •  RSUs or Options
      •  Calculates option fair values automatically using remaining contractual term, as required by ASC 505
      •  Auditable and supportable
•   Modification Accounting
      •  Type I & Type III or combinations
      •  Exec modifications at termination or large modifications for repricing/option exchanges
      •  Assistance determining correct approach and shares impacted
      •  Customizable
•   Forfeiture Rate Analysis and True-Up at Vest vs. True-Up at Forfeiture Analysis
      •  Assistance developing a process to calculate the “right” forfeiture rate, with minimal time and effort
      •  Standard process overcomes issues inherent in many system’s reports
      •  Easy, repeatable, and auditable process, reviewed by Big 4 audit firms (for clients)
      •  Understanding your rates and the impact of switching from one method “Static” to “Dynamic”
•   Flux Analysis
      •  Quantifies and explains the reasons for expense variance from quarter to quarter, month to month
      •  Categorizes by new grants this and prior period, terminations, vesting changes, etc.

In addition to the expense assistance mentioned above, SOS can also provide other accounting assistance in the areas of:
•   Accounting Expertise
      •  Ad hoc assistance on questions on expense, modifications, disclosures, diluted EPS, tax accounting, and forfeiture rate application, etc.
      •  Auditor support on some systems (explain calculations, answer accounting questions)
•   Performance Grant Assistance
      •  Get your system setup to handle expense and diluted EPS correctly, no matter how complex your performance awards
      •  Spreadsheet calculations for performance options
•   System Accounting Training (not available for all systems)
      •  Inputs, system use, expense recognition, diluted EPS, tax accounting, etc.
      •  Our experts can train you onsite or via remote meeting software (sessions can be recorded for future reference

Meet our stellar team of well-known equity compensation experts

SOS Consultant Corner: A Few Skills to Master in the New Year

This month marks my 10-year anniversary of working for SOS. Similar to the reflection many of us tend to do near the end of each year, recently I've thought about the many projects I've been a part of and clients that I've had the pleasure of working with during that time. Continually working with different people and different companies can be quite a challenge in flexibility. However, it's not unlike being a typical in-house stock plan administrator. In-house administrators face the same challenges as consultants and need the same skills to navigate successfully through their day. I have found that it's helpful to have a few specific "soft skills" which are somewhat interrelated: being able to develop rapport quickly, wear different hats constantly, and most of all, use discretion. Always.

It's a funny thing, rapport. You would think one would need to be a "people-person" to be good at it, but I usually don't describe myself as one. I start with the approach of humility, being honest that I really don't necessarily know the answers to all stock plan questions, but I try to display some confidence that I will be able to deliver. I think it's mostly the honesty that wins them over. Under-promise and over-deliver. Just remember to come through on the delivery part. And if you won't be able to deliver as promised, let them know. Take responsibility and don't use excuses.

As for the different roles we play, nothing illustrates our predicament more than the fact that the equity department can be managed under different groups, depending on the company. We could be in Financial Reporting, Legal, HR, or even Payroll. No matter where we report, we will end up working with the other groups on a regular basis. I think honesty ends up playing an important role here too. I often start brief discussions with other groups with the words, "Now I'm no accountant, but..." or "I'm no lawyer, but...". What it comes down to is, are you able to speak their language, put yourself in their position, understand what they need and what your role is in being able to satisfy that need? You do not necessarily need to please all people, but you at least need to know how to communicate respectfully, mindful of how others see the situation. That will help each of you as you work toward common goals for the company's success. Also remember: words matter when you are audibly speaking to someone. Body language and other inaudible cues can often clarify the meaning behind those words. But emails don't have these same cues. Sarcasm doesn't write very well outside of Instagram memes. And in all matters of communication, audience is extremely important. I've had a few situations where I've found that a phone call or face to face conversation is best. When in doubt, talk it out.

Though honesty works well most of the time, it can occasionally become a bit more complicated - that's where discretion comes in. Maybe you're having an issue with your broker or other provider, something that employees are waiting on. In that case, you might not want to tell inquiring employees what the problem really is. A nice, general apology, with an explanation that you understand their frustration, or just letting them know you're working on it, can help in the meantime.

Work is where we spend the majority of our waking hours. If we work a little harder at being honest, knowing when to be discreet about sensitive issues, and building rapport with different teams and team members, it will make the workplace that much more enjoyable.

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

SOS Stock Plan Outsourcing

Full-time expertise at a part-time cost

Across Our Desk

From the NASPP Blog: Top ten trends in stock plan designForm 3922 gets an upgrade (The SOS 6039 Service team is happy to walk you through that)…Amending share withholding provisions.

ISS releases changes to US Equity Plan Scorecard

Uber engineer sues over stock options.  (I)SO confused…

Compensation Strategies releases survey on share ownership guidelines in small and mid-size companies…

Accelerating taxes by deferring taxes on equity compensation in private companies…Interested in startup equity?  Dan Walter is on part 8 in his series on the topic.

Post-election updates from myStockOptions.com…

Upcoming Equity Compensation Webcasts

Our webcasts cover high-priority equity compensation topics

SOS Solutions Webcast: The Professionals: Beyond Resources

Tuesday, February 7, 2017 11:00 AM PST


What do you do when no one has the answer to your equity related conundrum? You contact the professionals, of course. SOS’ Professional Resources Team has seen it all, done it all, and can answer those specialized knowledge questions that don’t come along every day.
Our team of experts can assist with accounting and administrative issues when you find yourself in a bind. Whether it’s a question on how to account for a modification, or how to negotiate a tricky corporate transaction, we will identify the right person on our team to help you.
Join Julie Kenia, a member of the SOS Professional Resources Team, as she discusses the services and solutions her and her team have to offer.


•   Julie Kenia, CEP, Stock & Option Solutions, Inc.

(As this is a webcast dealing with SOS products and services, NO continuing education credit is available for attending.)

Educational Webcast:  Market Trends in ESPP Design

Tuesday, February 28, 2017 11:00 AM PST


Julie Kenia from Stock & Option Solutions is joined by Emily Cervino, CEP, Fidelity Stock Plan Services, and Liz Stoudt, CEP, Radford to explore the most recent ESPP findings from the 2016 Fidelity /Radford ESPP data analysis. Discover plan design prevalence, how plan design impacts participation, industry variances, and a look back to see how things have changed since the 2014 study. We will also analyze participation levels and shareholding patterns after purchase for various plan types and demographics. Whether your company has an ESPP already or is thinking of implementing one, you will learn how new designs or changes can help you get the most out of your ESPP.


•   Emily Cervino, CEP, Fidelity Stock Plan Services

•   Julie Kenia, CEP, Stock & Option Solutions, Inc.

•   Elizabeth Stoudt, CEP, Aon Hewitt / Radford Valuation 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.)

SOS Xposé

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

Likes Change...Christine Zwerling, CEP, is with Twilio, Inc. as a Senior Manager Equity Compensation. Megan Hunt is now the Senior Team Manager, Stock Plan Services for Charles Schwab. Jeannette Bjoernsen is now the Sr. Manager, Stock Administration for Rocket Fuel Inc.  She took over for Ken Scully, who retired in December!  Ken is keeping busy with travelling, hiking, and preparing for a soon-to-be remodeled kitchen.  Laura Gallerane is working for athenahealth as the Sr. Manager, Compensation. Emily Del Toro is the Director of Executive Compensation, Global Equity and Retirement Programs for Intuit.  Sharon Orlando is now with Workday as the Senior Manager Global Stock Administration.

CEP Designation Bound...SOS’s LoAn Nguyen and Srinivas Kalakoti have both successfully passed Level 2 of the CEP Exam and are on their way to earning the prestigious CEP designation.

Toys, Toys, Toys… The SOS Team donated a very generous amount of toys to the Toys for Tots Program during the holidays. See our group pic from our holiday luncheon.

Nature Vibes… SOS’s Ryan Moore and his girlfriend, Justine, travelled to Death Valley National Park last month. Highlights of this short one-day trip included walking across crystalized salt flats, scaling extensive sand dunes, hiking through rock canyons carved by flash floods, beautiful sunrises, and a temperature of 20 degrees while camping (yikes!). Check out this great picture! 

Queen Encounter...Janet Cooper, Founder and Partner of Tapestry Compliance, has been appointed to ‘Officer of the Most Excellent Order of the British Empire’ (OBE) on the Queen’s New Year’s Honours List and will soon be invited to Buckingham Palace for the Queen to present her with the OBE.

Congratulations are in Order… Congratulations to the 81 professionals who recently passed Level 3 and have been added to this list! 

Industry News… Registration is now open for the 13th Annual CEP and Silicon Valley NASPP Symposium on March 28th, 2017 at Santa Clara University.  Register today for the best one-day event in Equity Compensation.  Visit the CEPI website for more details. 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 by March 31 for the early-bird rate. Certent Summit 2017 Registration Open! Planning your conference and travel budget for 2017? Be sure to include the 6th Annual Certent Summit, May 22 – 24 in Nashville, TN. Gather new tips and tricks, brush up on the latest trends in financial compliance and equity compensation, sign-up for a one-on-one consulting session with Certent experts, and network with industry peers. Visit certentsummit.com for information on the agenda, travel arrangements, and more.

SOS’s New Team Member...Chris Cox, Outsourcing Team-Nashville

In addition to the above employee, SOS hires, on average, approximately 30-35 seasonal employees to help us with our 6039 services.  This team aids us in producing and mailing approximately 150,000 3921 & 3922 statements for our clients.

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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.