Whether planned or unplanned, retirement prior to age 65 may present an income gap until the qualifying age to receive pensions and Social Security. While stock administrators cannot offer financial planning advice, they need to know how taxation variables impact executives as they draw down company stock from a variety of accounts and compensation plans. The complexity surrounding stock-based compensation clouds the dilemma: Which funds should be drawn from to optimize the performance and minimize the tax consequences?
When it comes down to it, we grant equity compensation for the benefit of the recipients. We aren’t granting awards for the joy of accounting for them, nor for the fun of taxing them. We want employees to be happy with their awards, and we want the awards to drive motivation, loyalty, and retention. Because inquiring minds want to know, Fidelity Stock Plan Services undertakes an extensive biannual survey to understand the participant side of the story, which can help plan sponsors to be more effective with their offerings. Here are a few of the results.
With the 24th Annual NASPP Conference and Exhibition coming up next week, we wanted to make sure you get the most out of your time in Houston. Attending conferences can be a struggle when trying to choose from a jam-packed schedule full of inspiring breakout sessions and balancing that with authentic, meaningful networking all while maintaining your day-to-day workload. You need to make the most of your time at the conference and here are 7 ways to do it.
Can you believe it? 2017 proxy season is fast upon us! It’s never too soon to start preparing your director and officer (D&O) questionnaires and ensure your firm is meeting all of its disclosure requirements. Read this blog for important information to ensure your company stays compliant.
A fast-growing medical device company expects to file for an initial public offering (IPO) next year. The company has offered incentive stock options (ISOs) to their executives and these execs now have the opportunity to exercise early, if they choose to. After the IPO, executives will be forbidden to sell during the 180-day lockup period and there will be limits detailing how much company stock an executive can sell all at once. The executives realize that these economic and tax decisions are more complex than those they have had to make in the past.
The phone rings on Gerald’s desk. He’s the stock plan administrator for Wynlap*. Denise, the wife of a recently deceased executive, is calling to determine how her late husband’s performance share units (PSUs) will be handled. Forty-eight-year-old Chris was senior vice president of security at Wynlap, a real estate search company, when he died in a tragic car accident, leaving behind Denise and their two children. Gerald, who has been the stock plan administrator for four years, hasn’t encountered the death of an executive or the question of performance shares and beneficiaries.
We hear a lot these days about “the war for talent.” “Talent” is never defined, nor is it ever explained why labor markets are so much more competitive now than they used to be (the “war” existed, it was said, even when unemployment was very high), but we all know that what is meant is mostly top-level managers and maybe software engineers. These are the people, it is said, who should get most or all of the incentives, including equity. There are a number of explanations for this that seem to make sense but that research shows are just not true.
During our recent thought leadership webinar, 10b5-1 Survey Results: What do They Tell Us?, Christine Cognetti McCasland, Executive Director within Morgan Stanley’s Corporate Equity Solutions unit, and Mike Andresino, Partner at Posternak Blankstein & Lund LLP, reviewed results from a joint survey conducted by Morgan Stanley and the NASPP. During the presentation, McCasland and Andresino laid out key requirements of a 10b5-1 plan. We’ve recapped them for you.
Stock options have been granted to executives at a regional airline for many years. After losing two senior executives to competitors recently, the airline’s board decided to award performance shares in order to provide current year income on vested shares through dividend equivalents. Dividend equivalents are payments of cash or additional company stock an executive receives after the units vest. While stock options do not pay dividends, dividend equivalents can offer executives the flexibility to increase or supplement their income. This example explains the benefits and how they work.
Leap year can make things complicated. For example, if you use a daily accrual rate for some purpose related to stock compensation, such as calculating a pro-rata payout, a tax allocation for a mobile employee, or expense accruals, you have to remember to add a day to your calculation once every four years. Personally, I think it would be easier if we handled leap year the same way we handle the transition from Daylight Saving Time to Standard Time: everyone just set their calendar back 24 hours. Rather than doing this on the last day of February, I think it would be best to do it on the last Sunday in February, so that the “fall back” always occurs on a weekend.