Year-end Came and Went... Be Prepared for Next Year
Don’t be fooled by the calendar, year-end is fast approaching and the work will be piling up and the panic will be setting in. Creating a checklist can help you keep on track over the coming months as you juggle your “day job” and complete all those year-end tasks.
A checklist should include deadlines, best practices details or tips, responsible parties and a box for that big red X you can enter after completing each task. Your checklist can be posted right in front of your computer, or other visible location, so you can see what you need to accomplish, when and how. This will also allow others to step in should you be overwhelmed with work that day or simply just need to finish your holiday shopping. One year-end task that always gets blurred is when and how to reset your YTD wages to zero in your equity platform. Performing this task on December 31st can be problematic if you haven’t entered any transactions from that day, resetting the YTD to zero prior to entering an exercise from December 31st can result in over or under taxation. Likewise, forgetting to reset prior to entering any transactions from the new year, can also be an issue.
We’ve been busy creating a checklist with best practices for equity compensation. Get it now.
Julie Kenia, CEP, Senior Equity Compensation Consultant
Stock & Option Solutions, Inc.
Julie joined the team at Stock & Option Solutions, Inc. (SOS) in 2006 and has been assisting clients with an extensive array of projects including stock option exchanges and repricings, data clean up and conversions, vendor searches, 6039 compliance, stock plan best practice reviews, training, day-to-day administration, and accounting related reconciliations. Julie became a Certified Equity Professional in 2008 and is a member of the strategic solutions group at SOS.
Are You Ready To... Release?
Does the thought of your next big RSU release give you the same anxiety as April 15th? With proper preparation, the day of your release can be much closer to a regular day of work.
Keep things simple
This is ideally done at the time of setting up the plan, but you can work closely with legal to determine the best tax method to use for withholding and paying the taxes due and we highly recommend that you stick to one method and not allow employees to choose how taxes are paid. Many companies choose share withholding to cover the taxes. If your company does not have ready cash available to cover the payment of employees' taxes to the IRS, consider mandating sell-to-cover method. Though you may need to work with your designated broker to make sure the employees involved are set up correctly, the point is to limit the possible choices and reduce the administrative work involved, and also to reduce employee confusion. Another best practice we've seen is to use sell-to-cover for non-US employees, for whom the "minimum statutory tax rate" is more challenging to determine and share withholding for the US population. (However, remember that the FASB is revising ASC 718 to eliminate liability accounting for over-withholding when shares are withheld.) The last thing you want to become is the debt collector chasing employees down to provide a check for the taxes due.
Make sure the tax man is "paid"eth
As the release date inches closer, work closely with payroll to ensure that each employee has the appropriate tax rates associated with their record in the stock database. Also, make sure you have the current year-to-date income numbers for the employees (ordinary income and supplemental), so your system can deal with the limits for taxes, such as the Social Security, Medicare, SDI, and Federal Supplemental $1 million. Lastly, do an estimate of the income generated from the release and provide the numbers to payroll to ensure the taxes are paid on time. They will appreciate your thoughtfulness, especially if they're up against the IRS $100k Next-Day Deposit rule!
Practice makes perfect
Once everything is current in the stock database, a few days before the release, you may want to do a practice release in a test database. This will provide you an idea of anything unexpected that may occur during the actual release, and allow you sufficient time work out the kinks. Maybe there was a termination since you ran the last report, or other changes that you hadn't considered in relation to the release. You can think more clearly and react more calmly when you aren't under the gun.
Take a deep breath, close your eyes, and exhale
You have done all the preparation and you are ready. Now just sit back and wait for the day to come to process the release. Just as a precaution, you may want to have another person available, in case you run into something unanticipated. Sometimes a fresh pair of eyes can see something you may have overlooked, especially if you have spent a long time looking at the same data.
Best of luck and happy release!
For more things to consider in anticipation of a large RSU release, you may want to review the webcast we presented last year: Ready, Set, Release!.
Apollo Mok, Equity Compenasation Consultant
Stock & Option Solutions, Inc.
Apollo is an Equity Consultant for Stock & Option Solutions, Inc. (SOS) and has over 14 years of equity administration experience. As part of the People Solutions division for SOS, he travels throughout the country to provide client assistance ranging from data migration/implementation to onsite administrative assistance.
NEW! Free SOS Educational Webcast:
The Spin Cycle- Don't Let Your Transaction Fade
Please join us for our next educational webcast on
February 23, 2016 at 11am Pacific Time, 2pm Eastern Time.
The talk has begun and management has given you the heads up that a spin-off in your company is on the horizon. You realize your equity instructions are missing a section describing how to run a spin cycle and you are unsure how much detergent to add, if you need to set the timer or which buttons to push. Will your blues remain blue or will they become gray?
This webcast will provide an understanding of how a spin-off can impact equity awards and how the decisions made by management can result in complicated and burdensome administration as well as extensive participant communication. Our panel will share some of the pain points they recently encountered, providing you with the knowledge to help you ask the right questions and hopeful avoid fading.
(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 Xtra needs your news!
Know anyone in our equity comp industry who's taken a new job? Anyone expecting an addition to the family? Anyone moving, getting married, releasing a new product, rolling out a new program, etc.?
Please send over any ideas/thoughts you have to firstname.lastname@example.org, we're happy to track down the person/company to confirm the news and get their acceptance to include it in Xtra. (All news is reviewed and approved by the person and/or company involved.)
ESPP: Tired or Trendy?
Here at SOS we are big fans of ESPPs - because we really do believe in the ideas behind equity compensation (big surprise): attracting, retaining, and motivating employees. We do think that equity comp, when properly designed and communicated, can really help with all three. And ESPPs can be a big part of that. Whether you are a brand new public company or you've been public for years, these plans can be a great way to engage your employees and get them to start thinking like owners.
We've been getting a lot of requests for assistance with ESPPs of late, from helping to roll out a new plan, to providing an enrollment website, to filing the requisite forms 3922, to calculating (or forecasting) expense. So we decided to take a look at the existing data on ESPPs to see if we could glean any trends.
We reviewed survey data compiled by the National Association of Stock Plan Professionals (NASPP) and Deloitte Consulting LLP in 2011 and 2014, and also some recent survey data from Fidelity Stock Plan Services working with Radford. Here's what we found.
Six-Month Offering Periods Are Slammin'
Six-month offering periods are all the rage! (And they have been for some time.) While it's true that other lengths of offering periods are increasing in popularity and 6-month periods are actually decreasing slightly, 6-month plans are still far and away the most popular.
And the Fidelity survey confirms this, however in the Fidelity survey results, 6-month offerings held sway by only 6%; 39% of respondents offered a 6-month plan with 33% offering a 3-month plan.
In 2011, 71% of all 423-plans had a 15% discount. And apparently companies are finding that works for them since that number increased just a smidge to 72% in 2014. The Fidelity survey shows that 52% of responding companies have a 15% discount.
Lookbacks Are Liked
For the uninitiated, a lookback is the ability to purchase shares on the purchase date at the lesser of the discounted enrollment date market value or the discounted purchase date market value - so if the stock price goes up during the purchase period your employees could be purchasing stock at a much greater discount that the discount % implies. In 2011, the NASPP survey showed 62% of the 423-plans had this feature. In the 2014 survey, that number climbed just slightly to 63%. So apparently lookbacks are here to stay. At least for the time being... And we are big fans.
Raves about Resets
A number that appears to have jumped sharply is the number of plans that have a reset or rollover feature.
To quote the NASPP survey results' definition "Automatic reset provisions are common in ESPPs that have an extended offering period with multiple purchases throughout the offering. Under the automatic reset, if the market value on one of the interim purchase dates is lower than the market value at the start of the offering, all participants are automatically withdrawn from the offering and re-enrolled at the current price. This locks in the lower price for the duration of the current offering, or longer if the reset triggers the start of a new offering."
The 2011 survey shows only 15% of plans with a reset or rollover, whereas the 2014 survey shows a total of 40%. That seems like quite a leap in only four years. However, the numbers don't quite add up since the 2011 survey had 284 responses to this question, but only 67 companies with an offering period longer than 6 months (and generally this feature is only available for plans with longer offering periods and multiple purchase periods in each offering). The absolute number of plans with this feature actually decreased from 42 to 31. But the number of respondents to this question also dropped from 284 to 79.
The Fidelity survey does not include data on this topic.
Holding Periods are Hot
Holding periods can be very handy for helping you harvest disposition data with ease. (Yes, I tried to get even more H words into that sentence, but I failed.) Companies often put restrictions not on the sale of shares, but on the transfer of shares out of an account with a designated broker. Keeping the shares at the designated broker lets the broker report the sales to the company and eliminates the painful process of paper surveys to track and report (and include in W-2 income) dispositions. In our experience, though, most companies limit the holding period to be 1 year from purchase and 2 years from enrollment period. This is a help. However, if participants transfer shares after that, it's a qualified disposition, which you're still supposed to track and include the income on a W-2. We at SOS are big fans of holding the shares with the designated broker even longer (forever, in fact). Of course, if you change designated brokers, you may have an even bigger headache. We should also mention that not all holding periods are designed to ease the disposition reporting issue. Some are designed instead to reduce the "flipping" of the acquired shares.
But on to the data... in 2011, 20% of companies with 423 plans had some kind of holding period. In 2014, this crept upwards to 22%. Not a huge leap, but a gradual evolution in the right direction (in our opinion). The Fidelity survey showed 23% of plans with a sale restriction and 45% (!) with a transfer restriction.
Are ESPPs evolving at the rate we'd like? No. We'd prefer to see everyone with a 6-month plan, a holding period that lasts until the end of time and a single designated broker. However, they do seem to be here to stay and they do seem to be moving in the right direction.
Interested in any more of our opinions about ESPPs? Email us at email@example.com.
Changes at SOS
Dear SOS Team Members, Clients and Industry Partners:
As many of you know, SOS's long time CEO and co-founder Marianne Snook recently retired. This is a big change for SOS as Marianne has been instrumental in building our extraordinary culture, allowing us to deliver success to our Partners and Clients with effectiveness and integrity. I am forever grateful to Marianne for her wisdom, warmth and leadership which helped me personally and guided SOS through the years. We all wish her an incredible adventure in retirement.
Marianne's departure also brings with it opportunities for SOS to evolve. I am looking forward to my new role as CEO and enthusiastic about the road ahead for SOS. Our company is enjoying incredible growth and success, giving us the ability to invest in our Team Members and attract the best equity talent in the industry. As our Leadership Team builds on our plans for the future, our focus remains on furthering our teamwork culture with our Clients and Partners. We are also eager to provide new opportunities for SOS Team Members that will link them into the equity benefit community even more.
Our goals include the creation of additional methods for Industry Partners, Clients and Team Members to tap into our incredible talent pool and expertise. By doing so, we will create imaginative solutions and new ways of thinking to enhance our industry. Through the years, SOS's innovative ideas have evolved into expanded services, from onsite staffing and expert professional services to full service outsourcing of equity plans. The combination of our team's talents ensures our customers have the exact expertise, information and problem solving skills they need right at their fingertips, while better enabling SOS to deliver services in a proactive manner.
Thank you for staying in touch with Stock & Option Solutions through our newsletter and industry events. Our entire team is grateful to work with such incredible Clients and Industry Partners!
Chief Executive Officer
Stock & Option Solutions
Formatting Mail Merge in MS Word: A Follow Up from the SOS Webcast
In November we presented, Mastering Mail Merge and Other Word Functions, with the hopes of providing a quick reminder of how to do some simple mail merging and other useful functions using Word that would be helpful to stock plan professionals throughout the year.
During the webcast, a number of questions arose that we did not have time to answer or to which we did not know the answer, but other webcast attendees provided responses. The following is an answer to one of those questions.
Please note that this article was developed using Word 2007. If you are on a newer or older version of MS Word, your steps and menu commands are likely to differ.
How can you format the text within the merge document?
Even when your source data is formatted correctly, that formatting may not carry into the merged document as you expect. Dates, prices, numbers can be challenging and require certain format requirements. So after receiving several suggestions we did test one suggestion that worked like a charm. The only struggle is identifying what the syntax (specific format rules) should be.
Using the tool allowing you to toggle your field to the actual field coding will allow you to create the correct format. The following steps and screen shots explains how to format common equity type fields.
- Set up your mail merge by inserting the merge fields you want to capture from your source data:
2. Highlight the fields and right click your mouse and you will see the following dialog box, choose Toggle Field Codes:
3. Choosing Toggle Field Codes, you can see that format change on the merge document you are building to the true syntax or rule:
4. Now you can add the correct syntax within the brackets to establish the format you want. Maybe you want to format the date so it is shown as Month xx, 20xx. Next, format the price to show $#,###.####.
5. Place your curser to the left of the closing bracket and insert the desired syntax as follows:
6. Once you have entered your syntax rules, select Finish & Merge and Edit Individual Documents:
7. Now you will see the format as you requested and you can save your final documents.
Julie Kenia, CEP, Senior Equity Compensation Consultant
Stock & Option Solutions, Inc.
Julie Kenia began working in equity compensation in 1993, managing the AT&T long term incentive program. She led the stock administration team during AT&T's challenging years of corporate actions up through the final acquisition of AT&T Corp. by SBC Communications, Inc. Julie joined the team at Stock and Option Solutions, Inc. (SOS) in 2006 and has been assisting clients with an extensive array of projects including stock option exchanges and repricings, data clean up and conversions, vendor searches, 6039 compliance, stock plan best practice reviews, training, day-to-day administration, and accounting related reconciliations. Julie became a Certified Equity Professional in 2008 and is a member of the strategic solutions group at SOS.
SOS Xposé - 2015's Most Talked About
...tender tidbits about people and players in our industry...
And the award goes to
… Individual Achievement Awards from NASPP were given to Donna Spinola of McKesson Corporation
, Thomas Welk from Cooley LLP
, and Emily Cervino of Fidelity Stock Plan Services
. Congratulations to you all!
Too cute for words
...Dan Walter and Melanie Jameson from Performensation
are having a blast raising their son, Greyden. See Greyden in his SOS onesie in this candid pic
...Emily Van Hoorickx of UBS Financial Services, Inc.
(San Jose) was named to Barron's 2015 Top 100 Women Financial Advisors for the sixth year in a row. Emily is a Certified Financial Planner, a CEP, and a long-term advocate for the equity compensation education.
All you need is love
... SOS's Andrea Best married Alvaro Domene
in Delray Beach, Florida at the Moriko Gardens (what a beautiful spot!) on November 5, 2014.
SOS is hiring and here are the members we have added to our team in 2015:
Diana Wickman (Outsourcing
Bill Storey, CPA (Outsourcing
Bobbi Miller (People/Staffing Solutions
Marilin Turner (People/Staffing Solutions
LoAn Nguyen (Outsourcing
Christopher Bahue (Sales
Ryan Moore (Sales
Farah Mangoba (People/Staffing Solutions
Lisa Sutter (People/Staffing Solutions
Carlos Sarmiento (People/Staffing Solutions
April Kilgore (Outsourcing
Bivan Mangat (People/Staffing Solutions
Kelley Moore (People/Staffing Solutions
Theresa Robinson (Outsourcing
Kimberly Butzke (People/Staffing Solutions
Sally Fivecoat (People/Staffing Solutions
Patricia Ford (People/Staffing Solutions
It's not goodbye
...Elizabeth Dodge, SOS's long time Vice President, has decided to start her own consulting company. We wish her well as she begins this new chapter in her life.
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.