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Ten Things About Qualified ESPPs

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March 06, 2018 | Barbara Baksa

Ten Things About Qualified ESPPs

For today’s blog entry, I have ten fun facts about ESPPs, courtesy of the NASPP/Deloitte Consulting 2017 Domestic Stock Plan Design Survey.

  1. Prevalence of ESPPs among respondents to the survey has been remarkably stable since our 2011 survey, at 52% of respondents. I keep hearing speculation that ESPPs are increasing in popularity, but, so far, that is not reflected in our survey results.
  2. Most ESPPs are qualified under Section 423: 82% of respondents report that they offer a qualified ESPP.
  3. 15% discounts are still common for qualified plans, with 72% of respondents offering this discount. Prevalence of 15% discounts has also been stable since 2011.
  4. 63% of companies that offer a qualified plan also offer a lookback. This practice also hasn’t changed since 2011.
  5. About half qualified ESPPs have a six-month offering period; a practice that has been consistent over the past four survey cycles, going back to 2007. In the 2004 survey, however, less than a third of qualified ESPPs had a six-month offering.
  6. Prevalence of qualified plans with a 24-month offering period has dropped from 19% in 2004 to just 6% in 2017.
  7. Just over half of qualified ESPPs do not provide for interim purchases during offerings. Of those that allow interim purchases, six months is the most common frequency.
  8. Share flipping is a lot less common than you think. Among respondents with qualified ESPPs, only 9% report that shares are sold almost immediately on average. Two-thirds report that employees hold for an average period of one year or longer.
  9. Only 6% of respondents with qualified ESPPs offer a quick sale program. And on the opposite end of the spectrum, only 22% impose a required holding period.
  10. If you can achieve a participation rate of over 40% of employees, you are doing pretty good. For qualified ESPPs, close to two-thirds, or 62% of respondents report participation of less than 40%. Participation in nonqualified plans is even lower.
- Barbara

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