The second ESPP Day, held in San Jose, CA on November 8, 2018, was another great success, with 60+ attendees. Industry experts shared their insights on topics ranging from ESPP Fundamentals to design considerations, expensing ESPPs, employee communications and more.
The last session of the day was a roundtable discussion. Facilitated by Robyn Shutak, Computershare's Equity Practice Leader, attendees posed and discussed several questions surrounding best practices of administrative and participant ESPP topics. Below is a roundup of that discussion.
ESPP Day San Jose – Roundtable Roundup
There was a discussion about allowing beneficiary designations for the ESPP. The consensus answer was if you do allow for beneficiary designations, then language should be put into the plan allowing for the company to determine validity of the designation.
We had a great conversation around best practices for ESPP participant communications and what communication services Computershare provides. One suggestion was that communications should be frequent and event-related. Enrollment periods, purchase dates and tax season were all seen as important times to reach out to plan participants. Some of the preferred output for those communications included:
- Welcome email or letter sent prior to an offering period
- Notify prior to enrollment with a reminder email
- Some companies send confirmation for those who have enrolled and for those who have not enrolled — "confirmation of un-enrollment"
- Communicate prior to purchase date to confirm the process for participants
- Communicate after the purchase — remind employees, how to access account, where they can find their shares, etc.
- Videos — keep to 2 minutes or under and include closed caption so people can watch at their desk without headphones
Computershare's "4 step process" (outlined below) is our unique end-to-end employee communications offering which helps companies meet their corporate objectives through improving employee's behavior. By using our global data, experience and wide ranging in-house capabilities to provide insight, this enables us to provide tailored communications across all channels.
- Diagnostics and Planning
- Concepts and Design
- Campaign Execution
- Analyze and Develop
$25,000 Annual purchase Limit Tracking
Robyn asked the attendees how they manage the $25,000 annual purchase limit tracking within their organization. One of the best practice solutions was to have payroll build stops into their system when contribution limits are met. Another suggestion was to process a "mock purchase" halfway through an offering period to forecast contribution usage.
Full and Fractional Shares
Robyn asked the attendees what their thoughts are on plans that issue whole shares vs. full and fractional shares. The benefits of being able to purchase full and fractional were compelling. Looking at the ESPP as a savings vehicle and an opportunity to invest in the market provided insight into how fractional share purchases allow for participants to put every penny to work.
The fractional amount is entitled to the dividend and any gain in stock value. There was concern about what happens when the company has to file a Form 3922 for 6039 reporting purposes because the form states that whole shares must be entered. It was advised that the company should round down / truncate the number. Some companies even put the actual number of shares (with fractional) on the statement they give to employees and truncate on the form submitted to the IRS.
One attendee asked what is the best practice regarding providing eligible participants a set enrollment period or a rolling enrollment period all year round. There was a mix of practice with some companies having set enrollment periods and others employing rolling enrollments. In both instances, we reinforced the idea that these choices are tactical and should not be included in any plan agreement. There was a bit of an "aha" moment when it was suggested that a company could offer an enrollment period — say within 30 days of an offering period, and they can have ongoing rolling enrollment. This would serve to inspire action throughout the year and would allow easier access for new hires to get into the plan once eligibility requirements are met.