September 2, 2009
Volume 2, No.9
In this Issue:
Webinar on September 17th: Year-End Pain
SOS Focus: Section 6039 Electronic Participant Statements
SOS Best Practice: Option Exchange
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SOS Back to School
If the first days of September weren't enough to turn our thoughts to education, the mass-marketing of back-to-school fashions and school supplies surely did the trick!And since we're thinking about education, we want to encourage all of our equity compensation brethren not to forget the importance of keeping yourself educated and up-to-date with all the changes in our ever-evolving industry.
Even if you've been a stock plan professional for years, it's always possible to learn something new. With that theme in mind, we'd like to remind you of all of the educational content currently available from SOS:
- The SOS Library - topics ranging from international best practices to accounting to communicating with your employees
- The SOS Monthly Webcasts - after each webcast a recording of the session is posted to our events page
- Follow us on
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Marianne Snook
Principal
Stock & Option Solutions
Free Webcast:
Taking the Pain Out of Year-end: Top Five Mistakes to Avoid + Top Five Automation Secrets
September 17th
Please join us for our next free webinar on Thursday, September 17th at 11am Pacific Time.
Description
(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.)
For more information, please feel free to contact us at xtra@sos-team.com.
Events!...
Less than four months until the holidays...and the dreaded year-end cycle for equity compensation professionals! If you're like most of us, this is always a hectic time filled with mountains of tax forms, never-ending paperwork and challenging cross-department coordination. And just like the rest of us, you are always looking for tips on how to manage this process more effectively.
Well, look no further - our next webcast will help you prepare for the upcoming months and beyond. Your year-end stock plan process doesn't have to make you lose sleep for months in advance. With some advance planning and a few key tips and tricks in your year-end toolbox, you can close out the year with accuracy and efficiency, meet your deadlines with time to spare, and still maintain your sanity with a smile. It's never too early to start planning for a perfectly executed year-end!
This panel of experts will review five of the most common and most painful mistakes made during year-end and provide you with practical pointers on how to avoid them. The session will also arm you with five automation "secrets" compiled from sources across the equity compensation industry (such as how to distribute those pesky Section 6039 participant statements electronically!). Even if you already have a year-end process in place, you won't want to miss this timely webcast.
Speakers:
SOS Focus: Electronic Delivery of Section 6039 Participant Statements
Section 6039 Participant Statements
Section 6039-1 requires companies that grant ISOs or provide 423-qualified ESPP plans to send a statement to participants that engaged in an ISO exercise or
ESPP share transfer during the calendar year by January 31 of the following year. Though the IRS has released proposed regulations modifying parts of these
regulations, the basic requirement for participant statements has not changed (though a specific format may be required once the regulations are finalized).
Based on a recent market research survey performed by SOS, most companies are still fulfilling this requirement via distribution of a paper form. Nearly 96%
of companies that responded to the surveys were sending out paper surveys for ESPP, either at the time of the transfer, or later, at year end. And for ISOs,
nearly 80% of respondents were sending paper participant statements for ISO exercises.
And why haven't companies begun sending these forms electronically? Well, until now, the IRS requirements for sending participant tax statements or forms
electronically have seemed daunting. However, sending these statement electronically is actually much, much easier to manage and can take the burden of
paper statements off your already hectic stock plan processes.
Electronic Delivery of Participant Statements
The most laborious of the requirements for electronic delivery is the requirement to obtain participants' consent to deliver the forms electronically (negative
consent is not acceptable).
Further, the consents must be obtained in a manner that demonstrates the participant can access the statements electronically. In short-hand this means that you
must use the same method to obtain consent that will be used to deliver the statement. For example, if the statement will be delivered via a website, the consent
should also be collected via a website.
At SOS we believe that the easiest way to deliver statements electronically is via email. To make the email delivery compliant with the IRS requirements, simply
send the request for consent out via email. (The email soliciting consent should also contain a number of required disclosures about the duration of consent,
termination of consent, etc.) The participant could email consent to the stock plan group by replying to the email or print a form attached to the email and
submit the consent via paper.
We have discussed this approach with a number of equity compensation professionals and legal experts and all felt that this complied
with the IRS requirements.
A few additional requirements worth mentioning:
Despite these requirements, emailing out 6039 statements is an easy way to alleviate a significant burden on your stock plan team, save money, save trees,
and reduce the risk of error inherent in any manual process.
Questions on this article? Looking for an easy way to email participant statements? Email us!
Product Spotlight: SOS Data Audit
How many times have you found something odd in your equity database and thought maybe something was entered incorrectly or possibly not at all?
Have you recently, or even in the past, acquired a company and merged their equity data into your database? Are you thinking of converting to a new software or system?
Depending upon the software you currently use, the SOS Data Audit process can help you identify up to 65 possible audits. In some cases this can be
done simply by providing us access to your database or through a predetermined set of data exports. Our technical and data teams will perform
the audits and return the findings to you along with some possible solutions to correct the issues.
Key Audits:
SOS Data Audit Benefits
Option Exchange Best Practices - Simultaneous Grant Acceptance?
By Thomas Welk, Cooley Godward Kronish LLP
Question: Is it possible to avoid a separate grant acceptance of the new grant that results from an option exchange? Can the acceptance to exchange the grant also be deemed the acceptance of the new grant, thereby significantly streamlining the administration required for an exchange?
Answer:
While I agree with the general notion that acceptance of a stock grant should generally be after the grant is made (i.e., the terms of the new award are complete), I think that the acceptance of an exchange may be drafted in a manner to include an acceptance of the grant to be received as part of the exchange.
Here, the acceptance to participate in the program includes accepting the stock grant to be received in the exchange. Acceptance to participate in the exchange includes:
With most exchanges, the exchange ratios are set -- so it's really just a mathematical function remaining.
I guess I'm wondering why a separate Grant Acceptance is even necessary. In other words, how would it be possible to accept the exchange, but not accept the new grant? I would be leery of such an arrangement.
There's also a (somewhat) related 162(m) issue -- specifically, whether there is further action by the Compensation Committee granting the option after the exchange. Many times, there is no further action -- it's all automatic. If it is automatic and the Board approved the exchange, then there's a question whether the Compensation Committee appropriately approved the replacement grants. This all goes to the general issue of whether everything is automatic once the exchange program is in place, or whether the parties need to take further actions after the program concludes.
SOS Xposé
...tender tidbits about people and players in our industry...
On the Move!...
Monica Volta has started as Equity Program Manager at Facebook... Due to the EMC acquisition of Data Domain,
Joanne Norgart, CEP, and Senior Manager at
Data Domain is seeking a position in equity compensation in Silicon Valley. However, Joanne is also willing to consider relocation to NM, AZ or CO...
Players...
The Certified Equity Professional Institute (CEPI) and the National Center for Employee Ownership (NCEO) are proud to announce that the results of the 2009
Employee Stock Purchase Plan Survey are now available... Registration is still open
(until September 25) for the November 7 CEP exam. Don't miss the CEP
Symposium on December 8 or the GPS Training on December 9...
The Global Equity Organization has announced a series of OneDay meetings around the US in
October... Mission Mpower is pleased to introduce Data Central. Data Central uses a unique, automated approach to determine the hidden problems deep within
your database...