How a Government Shutdown Affects Your Equity Plan

From what I’ve been reading in the news, the current government shutdown may be a long one. Given this, you might be wondering how the shutdown will impact your equity plan operations. Here’s what I’ve been able to ascertain.

SEC Filings

The SEC is operating in accordance with its plan for a government shutdown. Here’s what this means for your equity program.

EDGAR Still Operational

The EDGAR system is operated pursuant to a contract and remains fully functional during a shutdown so long as funding for the contractor is available. This means that users can still access filings on EDGAR and filings can still be submitted (during standard EDGAR hours)—at least until the contract funding runs out.

Thus, companies and insiders can continue to submit all public filings and the deadlines for public filings have not been extended. In the context of equity plan administration, this includes:

• Forms 3, 4, and 5
• Form 144
• Form S-8
• Form 8-K
• Form ID

Will the SEC Still Process Form ID Submissions?

The SEC’s plan states that “SEC personnel will be able to process requests for EDGAR access codes and password resets and answer questions about fee-bearing EDGAR filings and other emergency questions regarding EDGAR submissions.”

Thus, Form ID can still be submitted and will be processed by SEC staff. But, as noted by Alan Dye in his blog on Section16.net, given the SEC’s limited staffing levels during the shutdown, you can probably expect it will take the SEC longer to issue the codes than before the shutdown.

My understanding is that with the transition to EDGAR Next and the new Form ID, it was already taking around three weeks to process Form ID—longer if there were issues with the submission. Now the processing time may be even longer. The inability to obtain access codes for a new insider doesn’t extend the deadlines to file Forms 3, 4, and 5, so plan ahead for any new insiders you expect to be onboarding.

My session at the NASPP Conference, “EDGAR Next: Best Practices & Next Steps,” will discuss challenges with the new Form ID, including tips from the SEC and common mistakes (and a host of other EDGAR Next planning and policy considerations). Don’t miss it!

If you do have a late filing because you weren’t able to obtain EDGAR access codes for the insider in time, you can note this in the Item 405 disclosure of the delinquency. You aren’t required to include a footnote or otherwise acknowledge the delinquency in the filing itself. If desired, a footnote could be included in the filing to explain the reason for the late submission, but I think it might be preferable to skip this so as not to call attention to the delinquency.

You’re On Your Own for Interpretive Advice

SEC staff will not be available to process filings (other than Form ID), provide interpretive advice, or issue no-action letters. If you have a question about how a transaction should be reported or need other interpretive guidance, you’ll need to rely on your own advisors (and, of course, Section16.net subscribers can rely on the Forms & Filing Handbook).

Form S-8 Is Automatically Effective

The SEC staff is not available to declare any registration statements effective, but luckily Form S-8, which is used to register new and amended equity plans, is effective immediately upon filing and does not require SEC review. Thus, the shutdown will not impact your ability to register allocations of shares to equity plans.

Can IPOs Still Happen?

Well, IPOs are a little outside the scope of equity compensation, which means this question is beyond my expertise. But according to TheCorporateCounsel.net, IPO registration statements can still go effective during the shutdown.

The IRS

Although, according to its shutdown plan, the IRS has furloughed around half of its personnel, its filing and other systems remain operational. As explained in a memo by Latham & Watkins, “The plan indicates that retained IRS employees are tasked with implementing the One Big Beautiful Bill Act, testing systems for the upcoming filing season, processing remittances, and updating tax forms, among other prioritized exempt and excepted activities.”

Thus, companies still need to remit tax withholding deposits and submit their tax filings. All deadlines applicable to these obligations remain in effect. The same goes for employees—any tax deadlines they are subject to remain in effect.

IRS call sites for taxpayer assistance are closed, however, so you will not be able to rely on these services for help with any of your filings or remittances.

What About COLAs?

This is about the time of year that the Social Security Administration announces its cost-of-living adjustments for the coming year. According to The Hill, the SSA has indicated that the shutdown has delayed the announcement of the COLA for Social Security benefits because the Bureau of Labor Statistics will be late with its Consumer Price Index (CPI) data for September (which the COLA for Social Security benefits is tied to). According to Newsweek, the SSA anticipates announcing the COLA on October 24.

The COLA announcement for Social Security benefits typically also includes the adjustment to the Social Security wage base. Since this adjustment is based on the National Average Wage Index rather than the CPI, I’m not sure this announcement will be included in the October 24 release. I guess we’ll find out in a couple of weeks.