In 2014, there were a number of developments in regulations, Securities and Exchange Commission enforcement and tax rules that will impact employee stock plans in 2015 and beyond – for both plan administrators and participants. Here is a snapshot of some of the current major issues for the industry. The links at the bottom of the post provide additional detail.
The SEC is stepping up enforcement efforts on regulations related to employee plans. In September 2014, an investigation led to 13 officers/directors and six companies being held liable for various infractions, with fines for each ranging from $25,000 to $150,000.To minimize the risk of SEC action, companies should make sure to designate specific employees with responsibility for filings for employee plans, maintain a training program for company insiders and conduct regular process audits.
While the efforts to integrate FASB and IFRS accounting standards continue to move slowly, some notable FASB updates could impact 2015. There are currently proposals that would affect share withholding, forfeiture rates and income tax accounting.
The 1099-B tax form for 2014 has several significant changes related to cost basis reporting, compared to the 2013 version – including new boxes and a redesigned format. We advise that you consult with your company’s tax experts to help ensure that you and your participants are aware of and understand the changes. 2014 also saw some changes to the cost basis rules that affect purchases and sales. You can get detailed information on these changes and how they impact participants at myStockOptions.com
Institutional Shareholder Services (ISS) policies
ISS is introducing a scorecard-based model to evaluate equity plan proposals, rather than the simplified “pass-fail” model used in the past. This may drive some companies to adopt plan features considered positive by ISS. There are a number of additional implications for the complex scorecard model, which you can read about in greater detail in a recent Georgeson Report
Our brief outline of issues with multiple layers of complexity gives an overview of what to look for. For greater detail, we encourage you to check out these additional resources: