April 30th, 2013
Volume 6, No. 2

In this Issue:

Employee Equity Education

And the Survey Says...

SOS Out and About

Equity Roll Forward

Free SOS Educational Webcast: The Mod Squad - A Guide to Modification Accounting for Stock Plan Professionals

SOS Consultant Corner: Is Allowing Employee Discretion "Tax"ing Your Stock Program?

SOS Xposé

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From the SOS YouTube Channel:

SOS Stock Plan Portal

Deliver stock plan tax and transactions information, obtain employee consent for electronic 6039 delivery, ESPP enrollment, grant acceptance, all in one place!

SOS Employment Opportunities

From the SOS Library:

Consenting Adults? Tackling the Challenges of Electronic Delivery of 3921/3922

Part I

Part II

Let SOS "Prove" your DTA Balance

Click here for more information and pricing

From the SOS Webcast Archive-

Taking Ownership of Share Ownership Guidelines

Our Services:


Equity Compensation Projects/Consulting

SOS-TEAM Outsourcing

Contact Us:

On our webpage


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.

How Much Do Your Employees Know About Their Equity Awards?

As a stock plan administrator we have all received those crazy questions that make us scratch our heads and wonder if the employees really know what a stock option is or whether they understand the value of their restricted stock units.  Those are the days that make us question if our communications are working.  Maybe our communication plan is just plain stale or hard to understand or even…not readily available.  Companies generally offer equity annually but may only provide the required plan documentation with their delivery and never consider this as a time to educate.  

Before you find yourself spending hours on the phone explaining vesting, tax withholding, share issuance or even how to access their participant accounts at a third party vendor it may be time to reevaluate your equity plan communication material and delivery.

Here are some quick tips to get you started down a path to success:

  • Create a FAQ document that covers the important features of the equity tool and shows some clear examples…in layman’s terms.

What is a Stock Option? – The Stuffy Plan Language Version

A stock option is a right to purchase shares of XYZ Common Stock at a set price (the “Grant Price”). The Grant Price is equal to the Fair Market Value (FMV) on Date of Grant.  The stock option is also subject to vesting requirements.

What is a Stock Option? – layman’s term

A stock option is a right for you to purchase shares of our company stock at a price that is set at the time of the grant, known as a grant price.  The grant price is generally the closing price of our stock on the date the grant was awarded.  The number of shares available for you to purchase are outlined in a schedule within the grant referred to as a vesting schedule.    

  • Establish a focus group of employees that make up a representative population of those eligible to receive equity and test your material.  Make the sessions short and fun….maybe a multiple choice.  This can be a good way to test if your FAQs are really working...  

What is a Stock Option?

  1. A stock option is a right to purchase shares of our company stock at a set price
  2. Shares of company stock held in the name of the option holder by the company
  3. Stock of any company of my choosing issued to me on the vesting dates

  • Create a video or snippets that you could post to your intranet or even YouTube.
    • The uneducated optionee
    • The educated optionee 
    • Take a look at these videos SOS created to help participants understand Form 3921 and Form 3922
  • Once you have a clear set of FAQs you can now provide these to your employees in a few ways that are easy to locate.
    • Deliver with your annual grant documents
    • Post to your company intranet site under a portal designed just for equity tools
    • Post to your third-party vendor site if they provide an area where you can store company documents
    • Email to employees at key times of the year such as immediately prior to a vesting date
    • Create an interactive tool on your company website or maybe your third party vendor has one you can use

Don’t post and forget!  Review your documents at least annually if not more frequently depending upon events within your company.  Too many times we want to do this once and move on but as most of us have experienced…it doesn’t hurt to keep this document updated and in the forefront of our employees' minds. We remind employees of their annual benefit enrollment opportunities, why not remind them of their equity too!

Julie Kenia,
Senior Equity Compensation Consultant
Stock & Option Solutions



Julie is a Senior Equity Consultant for Stock & Option Solutions, Inc. (SOS). Julie has helped countless clients with projects ranging from special dividends to stock splits and option exchanges as well as data conversions related to software vendor changes. Julie has also provided clients with interim stock plan support during leaves. Prior to joining SOS Julie was Manager of Long Term Equity Plans at AT&T Corp.

And the Survey Says...

Our latest market research poll asked respondents to let us know which industry-related conferences they were planning to attend this year. Respondents were entered into a drawing for a $100 gift card and the winner is: Marge Turkenkopf of Praxair.

180 vendors and issuers responded and the results didn’t come as too much of a surprise to any of us, with the NASPP conference getting the lion’s share of attendees, but with other conferences making a healthy showing as well.

SOS will be attending (and generally speaking at) most of these conferences, so we’ll see you there!

Results of SOS Equity Compensation Attendance Survey


SOS Out and About

Where we've been...

  • ShareComp 2012: Marianne Snook presented in a roundtable and gave a presentation on year end communication- Stock Talk: How to Communicate with Your Employees.
  • Elizabeth Dodge presented alongside Emily Cervino of Fidelity at the SF NASPP Holiday Event on December 13th
  • Susan Garvin presented in our SOS Educational Webcast: Outsourcings Great Expectations (For Small to Mid-Sized Companies): What to Expect When You’re Expecting Others to Do It Right with Joanne Burns of Financial Engines on January 24th Recording   Materials
  • Susan Garvin also spoke at the SVC NASPP Chapter meeting with Barbara Baksa of the NASPP on February 20th on Stock Plan Gladiators: Best Practices Worth Fighting For
  • EASi Summit was in early March and SOS hosted a booth and Susan Garvin presented Defending, Debunking & Demystifying Diluted EPS: A Plain-English Explanation
  • On March 12th Elizabeth Dodge spoke with Barbara Baksa of the NASPP in our SOS Educational Webcast: Executing Exceptional Expensing for ESPP   Recording   Materials
  • Elizabeth Dodge joined Kevin Hassan of  PwC in a NASPP webcast on March 20th: Out on a Ledge: Stock Compensation, Journal Entries and the General Ledger
  • March 26th-CEP Symposium is where 4 SOS’ers spoke on 4 very exciting and educational topics: Marianne Snook in Weapons of Mass Communication, Susan Garvin in The 6 Month Headache: Common Issues with ESPPs and How to Solve Them, Andrea Best in Perfect on Paper: Hiring Managers Reveal What They Look for in an Equity Comp Professional and Elizabeth Dodge in To Infinity - And Beyond! Reporting Outside the Box 
  • Susan Garvin presented Going Global: The Challenges and Best Practices for International ESPP at the  GEO Northern California Forum on April 18th.  Susan was joined by Jon Doyle of International Law Partners and Lydia Terill of TIBCO Software
  • On April 23rd, Barrett Scott and Andrea Best spoke together on an EASi webcast, Ahead of the Curve:  A Proactive Approach to Sustaining Excellence in Equity Compensation
  • Elizabeth Dodge took a road trip last week with Barbara Baksa of the NASPP for a NASPP Chapter meeting in Portland and Seattle and then to the NCEO/Beyster Institute Employee Ownership Conference to present Stock Plan Accounting Tricks and Traps for Private Companies
  • April 29th-May 1st: World At Work Total Rewards 2013- Marianne Snook spoke in State of Confusion: Which Equity Plan Is Which?

Where We're Going...

Who has joined SOS… SOS is hiring and here are some recent additions to the SOS Team:

Equity Roll Forwards

Are you sitting at your desk secretly hoping and praying that the VP of Human Resources doesn’t come over and ask you how many shares are available for grant because they are thinking of doing a broad-based grant?  Maybe you just started at a new company and inherited an unbalanced plan, or perhaps you’re having trouble keeping track of a new plan in addition to a legacy plan.  Either way, if you track shares available for grant outside of your equity compensation software, being confident that you know how many shares are available for grant will ensure you have one less thing to worry about in the middle of the night. 

So, how do you tackle a project like this, where you have years of history to reconcile?  It’s the same answer as to the question “How do you eat an entire bear?” – one bite at a time!  (My apologies to the vegetarians out there.)

Start at a Point of Confidence:  While you may think that you have to start at the beginning of time, that isn’t necessarily so.  If you have some point back in time when you were confident that the numbers reconciled, why not start there?  Knowing that you don’t have to go back to the beginning of time may just give you the confidence you need to begin the project.

Let Your System Help You:  Many years ago, I consulted at a company where they put notes in the Plan Comment field every month when they moved “returned” shares from their legacy plan to their new plan.  At that time, they had no other choice, but many software products now have functionality that lets you track the movement of shares from one plan to another.  If yours does and you haven’t taken advantage of the functionality, now might be the time to do so.  Spending an hour or two entering historical share transfers will save you a great deal of time when you start reconciling your plan(s).

Pulling Data:  Once you’ve determined whether or not you have a “point of confidence,” you now know how far back you have to pull data.  You want to run a report that shows every option and award granted and another report to show every option and award cancelled and download them into Excel.  It is not necessary to separate grants that were forfeited as opposed to expired, but you should be aware if your software separates these numbers into separate columns in Excel.  You’ll also want to be aware of any repricings or other modifications and how that would impact your numbers.  In a repricing situation, you will have two grants awarded (both the parent and the new child grant) and one grant cancelled (the parent grant); and, you may even have a subsequent cancellation of the child grant.

Setting up Your Workbook:  Copy each of these reports into a separate sheet in the Excel workbook.  If you have multiple plans, make sure one column has the plan identifier (e.g., 2000, 2009, etc.) in a separate column.  Using the YEAR function, create a separate column that has the year the grant was either awarded or cancelled.  If you need to, you can always use the MONTH function to do a more granular analysis.  Create a Summary worksheet that has separate columns for each Plan (one column for data that you calculate and one column with static information coming from your off-line tracking document) and columns for variances.  For each year, you will have a row for:  Beginning Balance, New Shares (e.g., if your plan has an Evergreen provision), Transferred (if your Plan allows you to transfer returned shares from the legacy plan to the current plan), Granted, Cancelled (I recommend consolidating forfeited and expired), and Ending Balance. 


2009 Plan



Off-Line Tracking


Beginning Balance (2007)




New Shares
















Ending Balance (2007)





Year-by-Year Analysis:  Start by looking at the big picture.  Use the SUMIFS function to pull in the shares granted and cancelled for each year and plan.  Compare the data pulled from the system with the numbers you’ve tracked outside of the system to identify any variances.  You just may find that there are fewer variances than you thought.  Some variances you may be able to reconcile very quickly.

Month-by-Month Analysis:  If necessary, you may need to do a month-by-month analysis for one or more years.  A separate worksheet should be set up for each year.  Simply follow the same process using SUMIFS, but this time for each month.  This will help you narrow down your search for where the variances actually occurred.  Be sure to document the reconciliation of any variances; I recommend doing this on a separate worksheet for each month.

Fungible Pools:  Of course, if your plan has a fungible pool, all of this will be a bit more complicated.  This plan feature requires that at least one specific grant type (usually awards) be deducted from the shares available for grant at a share ratio that is different from other shares (e.g., deduct awards at a ratio of 1.5 to 1).  If your plan has this feature, I recommend you create a separate Granted row for the shares that have a different ratio (e.g., one row would be Granted and a separate row would be Awards Granted).  Below the Awards Granted row, include a row for the Share Ratio.  This row would only contain the variance resulting from the share ratio.  For example, if Awards Granted is -50,000 and the ratio is 1.5 to 1, the value in the Share Ratio field would be -25,000 (-50,000 * .5).  You will also need to take the share ratio into consideration if cancelled shares are returned to the plan instead of being retired.  In this case, create a separate Awards Cancelled row and add a Share Ratio row below it to include the return of the additional shares that were deducted at grant (25,000 in the above example).

Final Clean-up:  Doing this type of reconciliation is often a great way to find problems with your data.  For example, in your off-line tracking you may have included shares for someone who terminated; however, the reconciliation may show that the person was never actually terminated in the software.  Make sure you follow through and fix any data issues uncovered and document on your reconciliation workbook any steps you took to reconcile the shares.

Barbara Richley,
Senior Equity Compensation Consultant
Stock & Option Solutions



Barbara Richley is a Senior Equity Compensation Consultant with Stock & Option Solutions. She assists clients with all manner of equity compensation challenges. Some of her recent projects have included a financial reporting system conversion and reconciliation, a re-creation and reconciliation of an equity roll-forward, a DTA balance reconciliation, and the update to Black-Scholes assumptions for a recently public company. Barbara has been working in equity compensation since 1988 and volunteers for the CEPI and the Silicon Valley Chapter of the NASPP.

Free SOS Educational Webcast:

The Mod Squad: A Guide to Modification Accounting for Stock Plan Professionals

May 30th, 2013

Click here to register

Please join us for our next educational webcast on May 30th at 11am Pacific Time, 2pm Eastern Time.


Do modifications under ASC 718 (formerly FAS 123R) leave you scratching your head? Is your company accounting for changes to your awards correctly?

Join our intrepid panel of experts as they infiltrate the wild world of modification accounting for share-based compensation, explain it in plain English and find ways to made it easier to handle inside or outside whatever system you are using.

Topics of this discussion will include:

  • The definition of a modification and what triggers modification accounting
  • The different types of modifications under ASC 718
  • ESPP mods (contribution increases and automatic resets) for rolling and fixed plans
  • Common termination mods (extensions of exercisability, accelerations of vesting, etc.)
  • Performance award mods (changing goals, service period changes)
  • Type 3 mods for corporate transactions
  • Tax accounting and Diluted EPS implications of mods
  • Ways to handle some mods in your current system
  • Spreadsheet workarounds and processes to help you handle modifications more easily


(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 Consultant Corner: Is Allowing Employee Discretion "Tax"ing Your Stock Program?

Does your company allow employees to elect a higher federal tax rate than the standard 25%, when they perform a stock option exercise? If you answered "yes", you are not alone. An informal survey conducted with a major plan service provider found that over 72% of the companies serviced by this provider allow their employees the ability to elect a higher federal tax rate, some as high as 60%.

Use a flat rate or play tax rate musical chairs - It turns out that the IRS actually frowns upon this and allows only 2 methods for tax withholding on supplemental income: (1) the "optional flat rate procedure "of withholding at a single rate that is currently 25%on supplemental income up to $1 million (no other rate); or (2) "the aggregate procedure", which is based on the employee's actual withholding tax rate at payroll. So, if the effective rate for employee A is 20%, with the aggregate method, you would withhold 20% on the exercise (make sure you find out your payroll contact's favorite food or alcoholic beverage, if you choose this method).These two methods are discussed on page 19 of the IRS Publication 15- Circular E and also last year in the IRS information letter 2012-0063.

Why wouldn't the IRS want more money? - The IRS does want their money, just not on an ad hoc basis. They want employees to either adjust their W-4 to withhold more taxes on a regular basis or make regular scheduled payments. This was discussed by Barbara Baksa of the NASPP in the NASPP blog earlier this year.

What about the state tax rate? - Most states play it safe and follow the lead of the IRS.

So, is it time for me to consider enrolling in the plumber's certification at the local community college? - Also mentioned in the NASPP blog mentioned above, the good news is that the IRS have not discussed any penalties or have enforced this requirement. So, you and the company should be OK for now. However, it never hurts to have a second career or hobby to fall back on.

Don't forget about the new Medicare rate - Starting this year, the Medicare tax rate goes up .9% to 2.35% once an employee's year to date total income hits $200,000.

Stay tuned to my next feature on the next pest exterminator association newsletter - "Bed Bugs: why can't we be friends? "

Apollo Mok,
Senior Equity Compensation Consultant
Stock & Option Solutions



Born and raised in the Bay Area, Apollo completed his bachelor's degree in finance at California State Unversity, East Bay. Upon graduation, he worked in the brokerage industry for 7 years with Smith Barney, Wells Fargo, and Schwab. In 2003, Apollo moved to San Diego to pursue a career as a professional surfer. After coming to the realization that never learning to swim could be a huge block to that dream and that he was more of an internet surfer, he entered the world of stock administration, working in various capacities before joining SOS in 2006. Some of his many SOS clients have included Starbucks, Whole Foods, Western Union, and United Health. Apollo has also held positions at Intel, Apple, and CareFusion. Apollo enjoys spending his free time with his wife, Lisa, and leads an active lifestyle in eating, watching TV, surfing the internet and visiting Costco.

SOS Xposé

Fresh starts…  Jennifer Lopez started April 1st as the Executive Director of ACSPA, reach her at jennifer@acspa.info. Kathleen Cleary is the new Education Director of the NASPP.. Sueling Wong has joined eBay as a Senior Stock Analyst...Wendy Davis has recently moved to Jones Day's Silicon Valley office, where she'll continue working with public and venture-backed clients on equity and executive compensation...Julie Mrozek started with SAIC in March as the Stock Programs Director and will be moving to Virginia in June.

The sky is the limit… Veena Bhatia has been promoted to Sr. Manager, Stock Plan Services at Gilead.

A pea in the pod…Vanessa Harrison of Stock & Option Solutions and her husband, Stephen, are expecting baby #2! Their daughter Charlotte can’t wait to meet her little brother this summer!

Baby love… Greg Snyder of Merrill Lynch and his wife Carrie were blessed with their second child on February 21st. Charles (Charlie) Anthony Snyder weighed 7 pounds, 8 ounces (see a pic!) and he and big brother Will are doing great!

Scholarly Pursuits...Ron Snitker of UBS completed a dual MBA program offered through Haas School of Business (UC-Berkeley) and Columbia Business School. Congratulations, Ron!

Industry News…  

Morgan Stanley announced sale of EMEA-Based Global Stock Plan Services Business-read about it here

EASi successfully completed its second annual EASi Summit conference with record attendance! See the pics

Berni Toy recently introduced UbiqIt™ a cloud-based compliance and program management application with an industry-centric tagging system that will centralize content that supports and governs Global Equity Compensation Programs, can track an approval process, and much more.   For more information visit www.BeUbiq.com

Baker & McKenzie recently launched a Global Equity Matrix app that provides critical legal and tax information on granting equity awards to employees and executives of public companies. It is free and easy to download on the App Store or on Google Play

(click for more information and a free quote)

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.
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