Market Trends in ESPP Design - Stock & Option Solutions · 2017-03-01 · February 28, 2017 1 SOS...
Transcript of Market Trends in ESPP Design - Stock & Option Solutions · 2017-03-01 · February 28, 2017 1 SOS...
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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
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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
Fidelity/Radford 2016 ESPP Data Analysis study.
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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
9Fidelity/Radford 2016 ESPP Data Analysis study.
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 months; all discounts; ending price
6 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
10Fidelity/Radford 2016 ESPP Data Analysis study.
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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
3 months; all discounts; ending price
3 months; 15%; look-back
6 months; all discounts; ending price
6 months; 15%; look-back
12Fidelity/Radford 2016 ESPP Data Analysis study.
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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
Total participation rate
U.S. participation rate
Outside the U.S. (O.U.S.) participation rate
Fidelity/Radford 2016 ESPP Data Analysis study.
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.
Total participation rate
U.S. participation rate
O.U.S. participation rate
Ending price
Look-back
Fidelity/Radford 2016 ESPP Data Analysis study.
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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
Fidelity/Radford 2016 ESPP Data Analysis study.
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
Fidelity/Radford 2016 ESPP Data Analysis study.
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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
Fidelity/Radford 2016 ESPP Data Analysis study.
Participation by Industry by Plan Design
Discount and purchase price type impact participation.
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Discount
Purchase Price Type
Sales Restriction
Fidelity/Radford 2016 ESPP Data Analysis study.
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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
Fidelity/Radford 2016 ESPP Data Analysis study.
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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
Fidelity/Radford 2016 ESPP Data Analysis study.
Nonqualified ESPP Participation Trends
Nonqualified plans are trending toward match provisions rather than discount.
24Fidelity/Radford 2016 ESPP Data Analysis study.
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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
Fidelity/Radford 2016 ESPP Data Analysis study.
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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
Fidelity/Radford 2016 ESPP Data Analysis study.
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]