Market Trends in ESPP Design - Stock & Option Solutions · 2017-03-01 · February 28, 2017 1 SOS...

www.sos-team.com February 28, 2017

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SOS Educational Webcast:Market Trends in ESPP Design

Emily Cervino, CEP, Fidelity Stock Plan Services

Julie Kenia, CEP, Stock & Option Solutions, Inc.

Elizabeth Stout, CEP, Aon / Radford Valuation Services

Disclaimer• The following discussion and examples do not necessarily

represent the official views of Stock & Option Solutions, Inc., Fidelity Stock Plan Services, or Aon Hewitt / Radford Valuation Services, with respect to any of the issues addressed. Moreover, this presentation and the views expressed by the individual presenters should not be relied on as legal, accounting, auditing, or tax advice. The outcome of any individual situation depends on the specific facts and circumstances in which the issue arises and on the interpretation of the relevant literature in effect at the time.

• Anyone viewing this presentation should not act upon this information without seeking professional counsel and/or input from their advisors.

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Materials Slides

http://www.sos-team.com/pdfs/Market Trends ESPP Design.pdf

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• Introduction of Survey Parameters

• Plan Design

• Plan Participation

• 2014 to 2016 ESPP Trends

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Agenda

http://www.sos-team.com/pdfs/TBD.pdf


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PLAN DESIGN

ESPP Plan Design BasicsMore than eight in ten plans are tax-qualified plans under §423. The majority of plans offer a 15% discount, a three- or six-month purchase period, and for non-Safe Harbor plans, a look-back.

82%

18%

Offering Type

6%8%

21%

11%

54%

Discount

6%

15%

33%

42%

4%

Length of Purchase Period

61%

39%

Price Type

42%

58%

Price Type (>5% Discount)

2 weeks or less

1 month

3 months

6 months

1 year

0% – No match

0% – Match

5%

10%

15%

423

Nonqualified

Ending price

Look-back

Ending price

Look-back

6Fidelity/Radford 2016 ESPP Data Analysis study.


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ESPP Plan Design Details

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Contribution Type

Max Shares per Purchase

Withdrawals Allowed?

32%

45%

23%

67%

33%

72%

21%

7%

14%

7%

10%

5%

3%

61%

Percentage

Dollars

Both

Less than 1,000

1,000 – 1,999

2,000 – 5,000

5,001 – 10,000

+10,000 +

No limit

Yes

No

No match or discount

Match

Discount

Nonqualified Plans

Fidelity/Radford 2016 ESPP Data Analysis study.

Plan Design Details

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Minimum Contribution %

Number of Increases Allowed

Maximum Contribution %

Number of Decreases Allowed

84%

7%

9%

66%

15%

5% 14%

Sale Restriction

27%

73%

25%

41%

26%

8%

Total participation rate

U.S. participation rate

O.U.S. participation rate

None

10%

15%

20% – 50%

None

0.01% – 3%

0

Between 1 and 5

Unlimited

0

1

2 or more

Unlimited



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Plan Design—RestrictionsSale restrictions are not a common plan feature. Transfer restrictions are more common, particularly in §423 plans.

78%

11%

11%

Sale Restriction Transfer Restriction

None

3 or 6 months

1 year or greaterTotal

423

Nonqualified


Plan Design—Length and DiscountPlan design varies considerably. Plans with a 15% discount and six-month offering make up just over a third of plans, with other combinations representing smaller percentages.

No discount or match

3 months; all discounts; ending price

3 months; 15%; look-back



6%

39%

12%

16%

27%

Companies in the “< 3 months” category all use end price; companies in all other categories use end price or look-back



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Plan Design—Purchases

From NASPP October 2013 Quick Survey

ESPP Plan Design by Industry

Industries are well represented in the study. Technology companies offer the most benefits with ESPP.

Due to rounding, totals may not add to 100%.

Design by Industry% of Companies

Cable & Telecom 4%

Energy 6%

Finance & Insurance

18%

Manufacturing 16%

Medical & Bio-Tech

9%

Professional Services

5%

Technology 22%

Travel, Entertainment & Recreation

5%

Wholesale/Retail 15%

No discount or match







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Plan Design by Industry

Plan design varies by industry.

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Sale Restriction Purchase Price Type Discount

Due to rounding, totals may not add to 100%.Fidelity/Radford 2016 ESPP Data Analysis study.

PLAN PARTICIPATION


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Participation by Plan DesignPlan design drives participation. Plans offering tax qualification, 15% discount, and a look-back have higher participation rates.

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Offering Type

Discount

Length of Purchase Period

Price Type



Outside the U.S. (O.U.S.) participation rate


Participation by Plan Design

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Plans with a 15% discount with a look-back have the highest participation, but discount is the largest single driver of participation.

Nonqualified PlansPrice Type and Discount

Nonqualified plans offer plan design flexibility. Discounts and matching programs can drive participation.



O.U.S. participation rate

Ending price

Look-back



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Participation and ContributionsParticipation can vary dramatically by plan design type. Plans with a 15% discount have the highest participation and the highest annual contributions. U.S. participation tends to exceed participation outside the U.S.

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Participation by Length and Discount Annual Contributions by Plan Design


Participation by Industry

Participation varies by industry, with the highest participation rates in industries offering the most value in the ESPP.

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Total Participation Rate by Industry



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Participation by Industry and Plan Design

Participation rates are tied to plan design.

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Total Participation Rate by Industry


Participation by Industry by Plan Design

Discount and purchase price type impact participation.

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Discount

Purchase Price Type

Sales Restriction



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2014 TO 2016 ESPP TRENDS

ESPP Trends

In comparing 2014 to 2016, there is a slight trend to the positive, with more tax qualification, more 15% discounts, and more look-backs.

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Offering Type

Discount

Price Type

Sales Restriction

2014 2016



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ESPP Participation Trends

Consistent with expectations, as plan design improves, so does participation. Participation rates grew more profoundly than plan design improvements.

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Participation Rates Participation by Plan Design


Nonqualified ESPP Participation Trends

Nonqualified plans are trending toward match provisions rather than discount.



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APPENDIX

U.S. and Outside the U.S. Participation Rates

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Price Type and Discount, U.S. Price Type and Discount, O.U.S.

Ending price

Look-back

Ending price

Look-back



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ESPP Value

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Average Value Delivered for Plans with Look-back

Average value delivered – 15% discount

Russell 2000 Index

S&P 500

15% discount trendline


Contact Information

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Emily CervinoFidelity Stock Plan [email protected] www.linkedin.com/in/fidelityemilycervino 408.656.2666

FOR STOCK & OPTION SOLUTIONS EDUCATIONAL WEBCAST ATTENDEES ONLY.

Stock & Option Solutions, Inc., Aon/Radford, and Fidelity Investments are not affiliated.The Fidelity Investments and pyramid design logo is a registered service mark of FMR LLC.Fidelity Stock Plan Services, LLC.789255.1.0

Elizabeth Stoudt, CEPDirector1650 Market StreetPhiladelphia, PA 19103Bus: (908) 380-0144E-Mail: [email protected]

Market Trends in ESPP Design - Stock & Option Solutions · 2017-03-01 · February 28, 2017 1 SOS...

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