When Are Shares of Stock Typically Purchased Under an ESPP?
An Employee Stock Purchase Plan provides a streamlined way for employees to buy stock in the companies they work for, typically at a discount of 10 to 15 percent off the then-current market price. The money to make these purchases is normally done through payroll deductions, which accumulate until the actual transactions that take place at predetermined dates.
Other People Are Reading
-
Enrollment
-
Enrollment in an Employee Stock Purchase Plan is a straightforward process, usually done either by phone or online through the bank or brokerage handling the account, with the employee's Social Security number and company stock symbol. At the time of enrollment, the employee determines the ESPP contribution rate, typically a percentage of pretax base pay up to 10 percent, which is deducted from the paycheck after taxes.
Enrollment Period
-
The enrollment period is the time that employees are permitted to sign up or make any changes to their ESPP contribution percentages, which remain the same for each period unless otherwise adjusted. Employees can also take advantage of the enrollment period to discontinue contributions or otherwise withdraw from the plan. Enrollment periods vary, but typically take place about a month before the time of purchase.
-
Purchase Period
-
The purchase period is usually coordinated with a company's fiscal quarter, a three-month period after which revenues, net income and other information is reported. All contributions made during this time are held in escrow until the actual buy is made, which usually occurs at or slightly after the end of the quarter. Predetermined contributions are automatically deducted from employee paychecks.
Exercise Date
-
The exercise date is when the bank or brokerage actually buys the stock for all participating employees. Discounts can run up to 15 percent from the share price on that date. The agent then credits each participant's account within a week after the transaction. The exercise date often coincides with the purchase period's final day, which can vary quarter by quarter but generally occurs within a few days of the month's end.
-
