Good Day Bogleheads Community. I am a longtime follower, first time poster. I'd like your expert opinion on if I am making an optimal or suboptimal decision regarding my company's ESPP program.
Overview: I've been with my company for a little over 2.5 years. I max out my 401k, but from the beginning have opted out of participating the company ESPP program for the following reasons:
a.) Not wanting to deal with the increased complication of having another brokerage account and increased tax complications.
b.) To continue with (1), if I'd decided to participate, due to the nature of things I worry that I'd let things accrue rather than sell immediately, which could potentially leave me overexposed to my company stock since it's already a part of the total stock market index. This is more like my psychological reasoning for not participating.
Overview of the ESPP plan, see below:
(1) Participation in the Plan is voluntary and you must enroll or “subscribe” to participate. Your subscription will begin on the first business day of the calendar quarter (January 1, April 1, July 1, or October 1) following your enrollment. However, the deadline for entering your subscription is midnight ET on the 25th of the month prior to the beginning of each calendar quarter (December 25, March 25, June 25 or September 25).
(2) A minimum 15% discount off the fair market value (FMV) of stock; Convenient payroll deductions; No broker commissions on the purchase of stock; A 12-month subscription period; Automatic re-enrollment will occur at the end of subscription period.
(3) When you subscribe, you agree to have a certain percentage of eligible after-tax pay (from 1% to 15%) deducted from your paycheck. The money is placed into an account for you and, at the end of each quarter, the money is used to buy shares of company stock.
(4) You subscribe to the program for a 12-month period. You will automatically be re-enrolled when your subscription expires. You can withdraw your subscription at any time, and payroll deductions will stop as soon as administratively possible. Please note, if you withdraw your subscription, you will lose your subscription price and will be restricted from re-enrolling in the ESPP for at least three months following your withdrawal date. Any deductions remaining in your account will be used to purchase shares at the end of the quarter. No refunds will be given for withdrawn subscriptions. New subscriptions will begin only on the first day of each calendar quarter. You must enroll by midnight ET on the 25th of the month prior to the first day of the quarter, otherwise your subscription.
(4.1) Subscription price will be determined by taking 15% off the FMV of the stock on the New York Stock Exchange on the
last market trading day of the quarter prior to your subscription date
(5)Your purchase date is the last trading day of each quarter. The Plan will purchase stock for you each quarter. Quarterly purchases allow you to take advantage of changing prices throughout the year. And with each passing quarter, you increase your ownership in company stock.
(5.1)Your purchase price will be the lesser of your subscription price or 85% of the FMV of company stock on the last trading day of each quarter.
At the end of each quarter, before your stock is purchased for you, your subscription price will be compared to the FMV on the date of
purchase. You will pay the lower of: Your subscription price; or 85% of the FMV on the date of purchase.
(5.2) Either way, you receive a minimum of a 15% discount off the FMV of company stock. Since your subscription price is “locked in” at the
beginning of your subscription period, your discount may be greater than 15% if the FMV of company stock goes up. You will never pay more
than your subscription price to purchase stock through the Plan for that period. Each quarter, the Plan will calculate how many shares the
money in your account will buy. The Plan then buys those shares for you and places them into your account at Schwab, the Plan’s
Administrator.
(6) You may sell your shares at any time after they are issued. Your shares will be sold at the FMV of company stock at the time of sale.
So, Yay or Nay? Was my original decision over 2.5 years ago suboptimal?
I look forward to your inputs. Do let me know if further details are needed. Thank you for your time and apologies for the wall of text.
Overview: I've been with my company for a little over 2.5 years. I max out my 401k, but from the beginning have opted out of participating the company ESPP program for the following reasons:
a.) Not wanting to deal with the increased complication of having another brokerage account and increased tax complications.
b.) To continue with (1), if I'd decided to participate, due to the nature of things I worry that I'd let things accrue rather than sell immediately, which could potentially leave me overexposed to my company stock since it's already a part of the total stock market index. This is more like my psychological reasoning for not participating.
Overview of the ESPP plan, see below:
(1) Participation in the Plan is voluntary and you must enroll or “subscribe” to participate. Your subscription will begin on the first business day of the calendar quarter (January 1, April 1, July 1, or October 1) following your enrollment. However, the deadline for entering your subscription is midnight ET on the 25th of the month prior to the beginning of each calendar quarter (December 25, March 25, June 25 or September 25).
(2) A minimum 15% discount off the fair market value (FMV) of stock; Convenient payroll deductions; No broker commissions on the purchase of stock; A 12-month subscription period; Automatic re-enrollment will occur at the end of subscription period.
(3) When you subscribe, you agree to have a certain percentage of eligible after-tax pay (from 1% to 15%) deducted from your paycheck. The money is placed into an account for you and, at the end of each quarter, the money is used to buy shares of company stock.
(4) You subscribe to the program for a 12-month period. You will automatically be re-enrolled when your subscription expires. You can withdraw your subscription at any time, and payroll deductions will stop as soon as administratively possible. Please note, if you withdraw your subscription, you will lose your subscription price and will be restricted from re-enrolling in the ESPP for at least three months following your withdrawal date. Any deductions remaining in your account will be used to purchase shares at the end of the quarter. No refunds will be given for withdrawn subscriptions. New subscriptions will begin only on the first day of each calendar quarter. You must enroll by midnight ET on the 25th of the month prior to the first day of the quarter, otherwise your subscription.
(4.1) Subscription price will be determined by taking 15% off the FMV of the stock on the New York Stock Exchange on the
last market trading day of the quarter prior to your subscription date
(5)Your purchase date is the last trading day of each quarter. The Plan will purchase stock for you each quarter. Quarterly purchases allow you to take advantage of changing prices throughout the year. And with each passing quarter, you increase your ownership in company stock.
(5.1)Your purchase price will be the lesser of your subscription price or 85% of the FMV of company stock on the last trading day of each quarter.
At the end of each quarter, before your stock is purchased for you, your subscription price will be compared to the FMV on the date of
purchase. You will pay the lower of: Your subscription price; or 85% of the FMV on the date of purchase.
(5.2) Either way, you receive a minimum of a 15% discount off the FMV of company stock. Since your subscription price is “locked in” at the
beginning of your subscription period, your discount may be greater than 15% if the FMV of company stock goes up. You will never pay more
than your subscription price to purchase stock through the Plan for that period. Each quarter, the Plan will calculate how many shares the
money in your account will buy. The Plan then buys those shares for you and places them into your account at Schwab, the Plan’s
Administrator.
(6) You may sell your shares at any time after they are issued. Your shares will be sold at the FMV of company stock at the time of sale.
So, Yay or Nay? Was my original decision over 2.5 years ago suboptimal?
I look forward to your inputs. Do let me know if further details are needed. Thank you for your time and apologies for the wall of text.
Statistics: Posted by IslandBobsled — Fri Jun 14, 2024 3:51 pm — Replies 19 — Views 549