May 15, 2012
Volume 5, No. 2

In this Issue:

Change at SOS

SOS Out and About

Consenting Adults? Tackling the Challenges of Electronic Delivery of 3921/3922 (Part II)

Fractional Shares on an ESPP - Pros & Cons - One Consultant's Thoughts

Free SOS Educational Webcast - A Fresh Look: Employee Stock Purchase Plans

ESPP Services and Solutions from SOS

SOS Xposé

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SOS Xtranormal Participant 6039 Education Videos:

SOS Employment Opportunities
From the SOS Xtra Archive:

Oops! Accounting for ESPPs - Share True Ups?

A recorded demo of "Email Xpress", the SOS automated solution for emailing participant stock plan confirmations and statements, is now available:

Email Xpress Demo

From the SOS Webcast Archive -

Hindsight is 20/20: IPO Lessons Learned

Our Services:


Equity Compensation Projects/Consulting

SOS-TEAM Outsourcing

Contact Us:




Ideas or Questions:

Do you have ideas for our next newsletter or webcast? Topics you're dying to see addressed but haven't yet? Please send us an e-mail with your ideas to: xtra@sos-team.com.

Change at SOS

Spring has finally sprung in California. And with it we are to spring some news of our own about recent happenings at SOS, some exciting, some a little sad.

We've Moved!

First on the docket is our move from San Jose to Campbell, CA. Just about 20 minutes farther North, and further into the heart of Silicon Valley. Our previous location in San Jose was beautiful and spacious, but too far South. Our new digs are much closer to many of our Silicon Valley clients and shorten the commute for most of our employees while putting us in walking distance of places we want to eat, drink and shop. Our new address is:

910 Campisi Way, Suite 2E
Campbell, CA 95008

But don't worry, if you lose the information, our website is already updated and our industry partners (NASPP, GEO, CEPI, etc.) are in the process of updating their records as well.

A Sad Farewell

Long time SOSer Sean Lembree is no longer with the company. Sean recently moved his family from California to Texas and was working remotely for SOS. SOS and Sean recently decided to part ways mutually and amicably. I thank Sean for all his amazing contributions to SOS over the last 9 years. SOS would not be where it is today without all his incredibly hard work, brilliant ideas, and winning personality. While we are very sad to see Sean go, we are excited to work with him in the future, as we know our paths will cross in equity compensation again. It is a small industry! All our best wishes go with him!

Marianne Snook
Stock & Option Solutions


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SOS Out and About

Where we've been...

  • On March 27, Susan Garvin and Elizabeth Dodge presented at the CEP Symposium as part of the "Stock Plan Gladiators: Best Practices Worth Fighting For" session. To view the slides, click here.

  • Elizabeth Dodge was also at the NCEO Conference in Minneapolis where she presented "Tax Compliance: The Dark Side of Equity Compensation" on April 27th.

  • Marianne Snook moderated "Hot Employee Equity Topics 3 Ways" at at GEO's 2012 California Forum on May 17th. Practitioners from Oracle (Barbara Wallace), Yelp! (Donna Hammer) and BrightSource Energy (Robert Coleman) came together to face employee equity topics/questions from 3 different perspectives (mature public company, recently public company and private company close to IPO).
Where we're going...
  • Sarah Roberts will be presenting "Risky ESPP Business: Avoiding and Mitigating Risk in 423-ESPPs" at the SVC NASPP All-day Conference on July 11th.

  • Susan Garvin will be presenting "Options for Underwater Options: What CAN and SHOULD be Done?" at the SVC NASPP All-day Conference on July 11th.

  • SOS is also very proud to announce that members of our team have been chosen to participate in five presentations at this year's NASPP Conference in New Orleans. More information to come in future issues of Xtra.

  • Finally, SOS has almost finalized the agenda for our Aspirations 2012 Conference. Because of both the quality and quantity of the response we received to our request for presentation proposals, we are expanding our program this year to include a total of 13 general and breakout sessions.
Who has joined SOS...

SOS is hiring, and in 2012, we have been able to bring a number of excellent consultants onboard. Here are the recent additions to the SOS Team:

Jessica Castro (SOS-TEAM Outsourcing)
David Johnson (People/Staffing)
John McCann (People/Staffing)
Dianna Hayes (People/Staffing)
Sorrell Johnson (People/Staffing)
John Lukas (People/Staffing)

SOS Webcast Recordings and Materials:

Mission: Implementation: A Stock Plan Professional's Guide to Implementing a Provider


Irrational International: Avoiding Common Errors in Non-US Equity Awards


Consenting Adults? Tackling the Challenges of Electronic Delivery of 3921/3922 (Part II)

Editor's Note: This is a continuation of an article from the last issue of Xtra. For Part I, click here.


The electronic version of the Form must contain all required information and comply with applicable revenue procedures (publication 1179 for 3921/3922) relating to substitute statements. You can do a mail merge that complies with the requirements to send an email - but it will generally be one email per "transaction" (exercise or purchase). Emails containing "composite" forms (with multiple transactions per form) are a little trickier but can be accomplished with MS Access or some commercially available software (SOS 6039 Xpress is a great example of one).


There are also requirements around notifying participants of the availability of the electronic form, and what you need to put in the subject line, etc.

Website - Notification / Email Subject line

If the form is available on a website, the company must notify the recipient that the form is available on the website. The notice may be delivered by mail, electronic mail, or in person. (Remember, you proved they could access the site while you were obtaining consent.) The notice must include information on how to access and print the form and must include "IMPORTANT TAX RETURN DOCUMENT AVAILABLE" (in caps). If the notice is emailed, the statement must be in the subject line of the email.

If you are distributing forms via a website, the easiest way to do this is, obviously, a mass email to ALL participants (whether they opted to receive forms electronically or not) once the forms are available. There is no rule that says you can't send EVERYONE the form electronically; you just have to make sure you also send a paper form to those that that did not consent to electronic delivery.

If you're sending the form in email, just make sure the subject link contains the required text. Easy, right?

Undeliverable electronic address

If an email bounces and the correct address can't be obtained, then the company must provide the form by mail or in person within 30 days after the bounce.

This can be as simple as checking an inbox a week after the original delivery and sending out paper forms to bounced emails at that time. Emails have a way of bouncing quickly if they're going to bounce.

Corrected Forms

If the company has corrected a Form that was sent electronically, the company must also send the corrected form in the same electronic manner. The corrected Form notice must be furnished by mail or in person if-

  1. an email notice bounced and
  2. the recipient has not provided a new e-mail address

Access Period

Forms must be available to the participant through October 15 of the year following the calendar year to which the Forms relate (or the first business day after October 15, if October 15 falls on a weekend or legal holiday).

Corrected Forms must be available for the same period or the date 90 days after the corrected forms are available, whichever is later.

Paper forms after withdrawal of consent

If a recipient withdraws consent to receive electronic forms and the withdrawal takes effect before the form is sent, a paper form must be provided. A paper form furnished after the form due date is timely if furnished within 30 days after the date the withdrawal of consent is received by the furnisher.

Overview of Process Start to finish:

So let's recap the process overall, is it really a lot of work? Or is it less work than you might think?

  1. Send an email (with the required disclosures or a link to them) that has a link to a survey or a consent website to all participants - use the template provided (Download it here) as a starting point for the disclosures
  2. Once a month send emails to new employees to ask them for consent.
  3. Throughout the year, pester your participants into consenting - raffle prizes can also be a very effective motivator
  4. In January, download consents (and withdrawals of consent) into your stock plan system so you'll know who will get paper and who will not
  5. Send a confirmation of consent / withdrawal either weekly (as they come in) or once, at the end of the year. (In a perfect world your consent website will send this automatically, like the SOS consent website.)
  6. In early to mid- January, either:
    1. Post the forms to a website and send an email notifying participants that they are available
    2. Send emails with the forms attached or embedded
    3. Make sure the subject line of the email says "IMPORTANT TAX RETURN DOCUMENT AVAILABLE"
    4. Check the email box from which the emails were sent for bounces
      1. If you received any bounces, try to find a better (corporate only) email address for the participants, if you don't find one, add the participants to the "paper" list.
    5. Send (or have your outsource provided send) paper forms to:
      1. Terminated employees
      2. Bounced addresses
      3. Those who did not consent to electronic delivery
As you can see, electronic delivery really is possible, even without an extensive IT budget. And Oh So Green...

Questions or comments? Please email us at xtra@sos-team.com

Elizabeth Dodge
Vice President, Product Management
Stock & Option Solutions


Fractional Shares on an ESPP - Pros & Cons - One Consultant's Thoughts

The Client Question:

If the vendor can handle, are there any challenges with purchasing fractional shares with no carry-forward?

The Consultant's Answer:

I find allowing fractional shares on ESPP purchases to be uncommon in practice. Most plans I see limit to whole shares only. If you wanted to write that flexibility into a plan, I'd have more than a few administrative concerns.

  1. Can your tracking software handle it? I think most of them can, but to how many decimal places? To truly make this work with no carry forward, you'd have to be able to track to probably 6 decimals on both the shares and prices and even then I'm not sure you'd avoid the carryforward.
  2. Can your broker handle accepting fractional shares?
  3. If not at the broker, where would this fractional share be held? Some TA's will keep, but you may end up setting up individual shareholder accounts at the TA to track these. Then each purchase you would add fractions to that account, then once the full share is reached you'd need to get that full share out the employee.
  4. How would you track the tax basis of these fractional shares? I'm not sure how TA's and Brokers would accommodate this in the new world of cost basis reporting.
  5. Is the company a dividend payer? How are fractional shares handled for dividend payments?
  6. How would fractional shares be handled in the event of a stock-split, merger or other corporate restructuring?
  7. What would you do with the fractional share if the employee wants the value before it reaches a full share? At some point, the company would probably have to pay cash-in-lieu for any fractional share held and you'd need a process and funding available for that.
  8. Communication with employees would become a nightmare - having to explain the impact of the fraction, the tax basis and reporting for later sale...
  9. How do these fractional shares impact items like your outstanding common stock numbers, Basic EPS? I've never actually had to work with fractional ESPP shares, so I'd want to have a thorough discussion with legal/accounting/TA, etc. to determine the impact.
  10. I'm not sure how you'd work this into the Section 6039 reporting - I think for the IRS you have to utilize whole shares only and true dollars and cents.
  11. While I cannot think of any off the top of my head, one concern I always have is international jurisdictions and their rules. I'm not sure fractional shares would cause any issues here, but when you have to look at newly issued vs. previously held and repurchased by the company vs. open market purchases to meet all the variables world-wide, I usually just throw up the warning flag on every item and say "we need to look at this from a non-US perspective" and hope someone knows the answers.
  12. Disposition tracking and reporting - similar concerns to some of the above- can I enter a disposition for a fractional share in my ESPP system? (Some systems allow you to purchase fractional shares, but not enter a disposition of the fraction, so it just hangs out there). How does the holding period/tax basis for calculation of income work with fractional shares?
  13. Wash Sale rules. I'm not sure how/if this could work if we are keeping fractions until a whole share is reached, so the shares would each have a different purchase date, tax basis for the fractions included.
  14. How would you tell an employee/track how long they have held the "share" created via multiple fractional purchases for QD/DD purposes?
I personally would advise against fractional shares. I don't think they will accomplish what the client is looking for and could lead to major administrative burdens. I don't see the harm in allowing fractional share purchases in the plan document should all the issues ever be resolved, but the processes/procedures should specify whole shares only.

Questions or comments? Please email us at xtra@sos-team.com

Susan Garvin
Senior Equity Consultant
Stock & Option Solutions


Susan Garvin is a Senior Equity Compensation Consultant with Stock & Option Solutions (SOS). Susan is a frequent speaker on equity compensation related topics; including events sponsored by the NASPP, the Certified Equity Professional Institute, and the National Center for Employee Ownership. She also created/delivered the "Stock Admin 101" seminar while with Salomon Smith Barney. Susan has been in the equity compensation field since 1993, with a wide range of experience, from IPOs to Mergers and Acquisitions to daily stock administration and training of new administrators. She is currently a member of NASPP, GEO and NCEO, received her CEP designation in 1994 and volunteers with the CEPI in many capacities. Susan has a BA from San Jose State University.

Free SOS Educational Webcast

A Fresh Look: Employee Stock Purchase Plans

June 6th, 2012

Click here to register.

Please join us for our next educational webcast on June 6th at 11am Pacific Time, 2pm Eastern Time.


The humble ESPP doesn't always grab headlines or dazzle the crowds, but with the most recent installment to the GPS series from the Certified Equity Professional Institute (CEPI), these historically underappreciated and under-served equity plans are getting a new resource. Never excessive, always in the money, and scoring big points on expense efficiency, the ESPP is a winning formula. This panel will address ESPP issues, particularly those that can sneak up and cause trouble. With discussion including design concepts, accounting perspectives, legal and administrative considerations, and gotchas, attendees will leave this session with a new perspective on ESPP.


(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.)

ESPP Services and Solutions from SOS

Our line of ESPP solutions and services will simplify your life, save you time and reduce your company's risk by streamlining your processes, helping you stay in compliance with accounting standards and tax regulations, and facilitating effective participant communication and education.

This month's Product Spotlight will focus on the myriad ways we have assisted our clients who offer an Employee Stock Purchase Plan as part of their equity compensation program.

ESPP Plan Rollout

Is ESPP new to your company? Our consultants have developed project plans for implementing these plans end-to-end. We work with decision makers to develop timelines, communications, process documentation, tax compliance, custom reports, and interface files. We can also provide assistance with, or complete management of, the ongoing processing of purchases.

SOS Outsourcing

Outsource your ESPP management to SOS. SOS can provide a spectrum of services in this area that can be tailored to your company's unique plan. We can manage your Open Enrollment, process your purchase, coordinate with payroll, respond to employee inquires and provide financial reporting and reconciliation. You decide what level of expertise and involvement you want and let SOS take care of the rest. The SOS outsourcing solution is unique, let us show you how.

Participant Communications

  • Participant Communication Campaign SOS can prepare a wide range of roll-out or ongoing communications beyond enrollment forms and presentations. May include FAQs, cover letters, email text, explanations of tax treatment, supplemental materials to assist in accessing brokerage accounts (web URL, contact info, commission rates, step-by-step account activation instructions), etc.
  • Participant Education
    Customized to the features of your plan, our ESPP Participant Education Program helps domestic and non-US participants understand plan basics, the finer points of taxation, and builds an understanding and appreciation of the value and benefits of your ESPP. May also be combined with similar SOS programs for options, restricted stock, or performance shares, as needed.
    • Topics
      • ESPP Basics
        What is an ESPP? What are the features of my company's plan? Why does it matter to me? What are the benefits? When can I enroll? What are the rules around withdrawals, increases and decreases? Why is it important to activate my brokerage account before purchase? How do I activate my brokerage account? What is a 3922 and what do I do with it?
      • Advanced ESPP Issues
        What are the tax implications in my country? How does the $25K limit work? Are there times when disqualifying dispositions give me better tax treatment than qualifying?
    • Formats
      • FAQs - Word, PDF or PowerPoint, HTML for web pages
      • Trainings
        • Onsite
        • Live webcasts
        • Recorded webcasts
          Note: for recorded and webcast-based sessions, we recommend several shorter sessions instead of longer sessions.
  • SOS Email Xpress
    An MS Access-based application, installed at your site, allows you to email ESPP communications to your participants, saving hours of tedious and risky manual labor and significant costs associated with hardcopy mailing. Additional static documents (such as FAQs, etc.) can be attached to these communications as well.
    Communications may include:
    • Confirmations of Purchase
    • Year-end Tax Summaries
    • Form 39221
  • ESPP Online Enrollment
    We can tailor an ESPP enrollment website, hosted inside your firewall, to your plan and specific requirements to allow your participants to enroll, withdraw, and change their enrollment online.
  • Online Disposition Surveys
    Tired of paper surveys? Put your disposition surveys online! Streamline the collection and import of disposition data into your stock plans database. We can tailor a Disposition Survey website to your plan and specific requirements, allowing your participants an easy way to notify you about their ESPP share sales.
  • Participant Response Center
    Whether your ESPP plan is new or you are trying to find better ways to handle the flood of participant inquiries around your enrollment window or purchase dates, SOS can help manage your workload better. We can establish a dedicated call center or email response team staffed by equity compensation experts trained in the specifics of your plan to provide your participants with the answers they need. And the centers can be scaled up or down based on the needs of your company, increasing hours at peak times and decreasing as inquiry volume drops.
  • SOS Participant Portal
    A secure website, hosted inside your firewall, allows you to provide secure ESPP (and other) communications to your participants, saving hours of tedious and risky manual labor and significant costs associated with hardcopy mailing. This portal allows your employees to obtain the information they need when they need it, reducing calls and emails to you or your group. ESPP-related communications may include:
    • Confirmations of Purchase
    • ESPP Online Enrollment
    • Year-end Tax Summaries
    • Form 3922 2
    • 6039 Consent collection module
      Allows you to collect participant consents for electronic delivery of forms 3922
Stock Plan Personnel Training

Customized to the features of your plan to help your staff understand ESPP basic and advanced topics. May also be combined with option, restricted stock/unit, or performance share trainings.

  • Topics
    • ESPP Basics
      Administration, global taxation (withholding/reporting requirements for US and non-US locations), common issues, contribution file reconciliation
    • Advanced ESPP Issues
      Accounting for ESPPs, Diluted/Basic EPS Treatment, Tax Accounting, mobility issues
  • Formats
    • Onsite
    • Webcasts
      • Live
      • Pre-recorded
IRS 6039 Compliance - Form 3922
  • Participant Statements
    For some in-house software, a custom report can be installed, allowing you to print these forms just as easily as you print a Confirmation of Purchase.
  • IRS Filing
    You are required to report ESPP "transfers"3 to the IRS for transactions that occurred during the prior calendar year. If you have over 250 transactions to report, you will also be required to report electronically. SOS can help.
  • SOS 6039 Xpress
    Our MS Access-based application can be deployed at your company site, allowing you to keep your sensitive participant data inside your firewall. Stock plan data is downloaded from your stock plan database to a pre-specified location. The SOS 6039 Xpress application retrieves the data, formats it per the detailed IRS file specification, and then creates substitute statements for mailing or emailing to your participants. Substitute statements are formatted to fit in a standard two-window envelope to avoid the need for mailing labels and to assure the right statement goes to the right person. Our application also creates the IRS e-file in the proper format for you to drop off at the IRS FIRE website.
  • 3922 Outsourcing
    Let our expert team take the burden of 6039 compliance off your shoulders. Transmit your sensitive data to SOS securely and let SOS produce the participant statements for you. We do not outsource the fulfillment process, but keep your sensitive data secure while the SOS team prints and mails your forms. We can even add these forms to standard year-end mailing packages and mail the entire package for you. In addition, we complete your IRS filing.
Process Improvement / Automation

  • $25K Limit Review
    SOS can work with your stock plans group and other departments to refine or develop documented processes and procedures. Can include development of customized reports.
  • Disposition Survey/Reporting Process Review
    Are you capturing as much of the valuable tax deduction as you can from disqualifying dispositions? Let SOS review your current process and suggest improvements - from finding ways to streamline the process to identifying issues that will get you in hot water with the IRS.
  • SOX Review
    Assist in identifying key controls that may be needed for and/or impact SOX 404 documentation/processes.
  • Modification Accounting
    If your plan contains an "automatic reset" or "auto-re-enrollment" when the stock price drops during an offering period, or if participants can increase their contributions during the period, modification accounting is required. Many systems cannot support this accounting requirement. We can customize an MS Access-based application to handle the necessary calculations and deploy it at your company site, allowing you to keep your sensitive participant data inside your firewall. Data is extracted from your in-house system or downloaded from your vendor to a pre-specified location. The SOS ESPP Modification Accounting application will retrieve the data, supplement it with additional information, as necessary, and produce reports customized to your needs. Excel models are also available and in some cases software workarounds may be implemented.
ESPP Conversions

Are you planning to change ESPP systems or providers? Struggling with complicated data formats and logistical hurdles during the conversion process? SOS can help! We've converted clients to and from many different systems and providers over the years and have faced the challenges you are encountering (or will encounter). Our ESPP conversion process leverages both subject matter expertise and technology tools to make the process consistent and repeatable and speed you on your way.

To learn more about the SOS suite of ESPP solutions, please contact us at (888) SOS-0199 or email us.

1To distribute forms only electronically, participant consent must be obtained.
2To distribute forms only electronically, participant consent must be obtained.
3For most companies the transfer can/should be reported as of the date of purchase. Please contact SOS for more information.

SOS Xposé

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

GEO Board of Directors...SOS CEO Marianne Snook is running for the GEO Board of Directors. We may be a little biased, but we couldn't think of a better qualified person for the position, and are asking for your support. Voting opens on June 1st, and is open through June 15th. Only registered members of GEO are eligible to vote, and must be registered by May 31st in order to do so. SOS will be sending out more information soon. For more information on becoming a member of GEO, please click here.

Change of Scenery...Danyle Anderson is the new Executive Director at GEO...Mike Hom, known for a long time around SOS not only for the tremendous expertise he brought to our clients, but also for his unique perspective he offered on any subject to those within earshot, has joined the stock plan group at Gilead Sciences...Rose Hoffman has a new job with E*TRADE Corporate Services as a Client Manager. Congratulations, and good luck to everyone!

A Walk Down the Aisle...Michael Palermo and Melanie Parsons, both from E*TRADE Corporate Services, are getting married on September 22nd.

New Arrivals...SOS's own Shawna Casey delivered a healthy baby girl, Chloe, on March 19th, 2012. Congratulations to Shawna, her husband Brandon, and Chloe's big brother, Cole! (picture here)...My Equity Comp's Gary Hamilton and his wife Kathryn are very pleased to announce that they have just recently had a wonderful 4 year old boy placed with them through the Foster Adopt system. Even better, his adoption should be finalized in the next 6 months. Congratulations to you and your family, Gary!...Kate Forsyth of Deloitte Tax LLP had a baby girl, Amelia, on February 2nd. Amelia was 7 pounds, 5 ounces and 20.5 long, and, according to her mom, born with a decent set of lungs on her! Click here to see a picture. Congratulations Kate!

Baby Bumps...Both Justin Docter and his wife, Liz, as well as Mike McDonald, and his wife, Jennifer, of SOS are expecting babies in the Fall. Congrats from all of us here at SOS on your growing families!

Lots of good news from EASi to pass along. Robin Silke, John Neider and Rose Masiuk have joined EASi over the last 4 weeks. In addition to her new position there, Robin will also be heading up the new East Bay GEO chapter. They also had a new arrival of the baby variety, as Thierry Vo had a baby girl, Hannah, on February 28th.

Industry News...The NASPP and PricewaterhouseCoopers are pleased to announce that they have teamed up to offer the NASPP-PwC 2012 Global Equity Incentives Survey. The joint survey is the industry's most comprehensive examination of global stock plan design and administration issues and will allow for year over year comparisons of compensation strategy and design, expensing, tax planning and compliance, global coordination, plan administration and employee communications. The full survey results will only be available to those companies that complete the survey. The survey must be completed by May 25, 2012.

2012 iQuantic® Global Long-Term Incentive Practices Survey - Buck Consultants' iQuantic® Global Long-Term Incentive Practices Survey has been helping organizations evaluate their LTI programs for over a decade. Participation in the survey this year is complimentary for first-time participants. As a participant, you will have the ability to get one cut of Buck's exclusive and customizable LTI data, as well as receive a copy of the survey's Practices report in July.

Click to register to participate. Upon registration, you will receive a personalized link to the questionnaire and an Excel-based data assistant to help provide employee-level data to the database. Submissions are due by June 15. For more information, contact 1.800.887.0509 or email at hrsurveys@buckconsultants.com. Additional information can be found here.

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 advisors. 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 | (888)SOS-0199