Ohio: Francesco Ferrante and Nathan Holmes of Thompson Hine will discuss Ohio’s tax enforcement efforts regarding stock options exercised by non-residents. (August 13, 9:00 AM)
Denver: Jennifer Tardif of Solium will present on “How to Minimize Risk while Maximizing the Effectiveness of Equity Compensation Management.” (August 15, Noon)
Also, don’t forget to tune in at 4:00 PM Eastern on Tuesday, August 14, for the national NASPP webcast “Trends in Stock Plans for Overseas Employees,” which will highlight results from the NASPP’s Global Equity Incentives Survey (co-sponsored by PwC).
This week, we feature another installment in our series of guest blog entries by NASPP Conference speakers. Today’s entry is written by Jon Doyle of International Law Solutions, who will lead the session “The Amazing Race–Revisiting Global ESPPs.”
Companies are increasingly revisiting global ESPPs. Whether your company has offered its ESPP globally for years, is considering starting or re-starting an ESPP, or expanding your existing ESPP into new countries, this session is for you. The panel will take an in-depth look at global ESPPs.
Increasingly, with complex and expensive regulatory obstacles, as well as low participation in some cases, companies are more selective in offering their ESPPs around the world. In addition, companies that may have suspended their ESPPs internationally due to compliance, participation and budgetary concerns, are increasingly exploring offering their ESPPs in new markets. The panel will discuss the importance of setting expectations on participation and educating executives and local management about global ESPPs.
We will examine the regulatory challenges of a global ESPP, including the unique issues presented by Section 423 plans and how a non-423 component may be of use to you. We will discuss balancing the goal of offering an ESPP broadly while staying compliant. We will explore how to navigate through compliance and administrative roadblocks, as well as the impact of a company’s corporate structure on these plans. The panelists will share their experiences and best practices for successfully offering ESPPs globally.
Don’t miss this session, “The Amazing Race–Revisiting Global ESPPs,” presented by Jon Doyle of International Law Solutions, Bob Hartley of BMC Software, Wendy Jennings of Riverbed Technology, and Kate Lloyd of Accenture at the 20th Annual NASPP Conference in New Orleans, October 8-11.
NASPP “To Do” List We have so much going on here at the NASPP that it can be hard to keep track of it all, so we keep an ongoing “to do” list for you here in our blog.
NASPP Members Eligible for Discount on CEP Exam If you’ve been thinking about enrolling for the Certified Equity Professional exam, now is the time to do it. Because the NASPP serves on the CEP Institute Advisory Board, we are able to offer NASPP members a $200 discount on the November 3, 2011 exam.*
The CEP program is the certification standard for the equity compensation industry, comprised of a three-level, self-study program in the technical regulatory issues affecting equity compensation.
Visit the CEPI website for more information on the program. To take advantage of the NASPP member discount, contact the CEPI at (408) 554-2187. Don’t wait; registration closes on September 21.
* The Fine Print: Eligible registrations include new Level 1, Level 2 or Level 3 registrations for individuals who are involved in administering or managing their own company’s equity programs. Deferrals and re-tests are not eligible for a discount. Individuals already registered are not eligible for a retroactive discount. Candidates from service providers do not qualify. Questions regarding eligibility can be directed to the CEPI at (408) 554-2187.
Trivia question: Which major US Supreme Court decision this summer is going to impact tax withholding procedures for your stock plans next year?
If you guessed the decision on the Patient Protection and Affordable Care Act (President Obama’s healthcare reform package), you are a winner! 10 points to you!
What the Heck?
The reason is that the healthcare reform package increases Medicare taxes beginning next year (see my blog “One for You, Nineteen for Me–US Style,” July 20, 2010), which changes the rate at which Medicare needs to be withheld for stock compensation. With the Supreme Courts’ ruling, the new tax rates will now go into effect as planned. Even if Mitt Romney wins the presidency and does manage to repeal the entire healthcare package, he’s won’t take office in time to prevent the new Medicare tax rate from going into effect for at least part of 2013.
Another Tax Threshold to Track
Under the Act, Medicare will increase to 2.35%, but only for compensation in excess of $200,000 ($250,000 for married taxpayers that file jointly, $125,000 for married taxpayers that file separately).
If you are counting, this makes three separate wage thresholds that we need to track to properly withhold taxes on stock compensation:
Social Security: Applies only to wages under a specified maximum, currently $110,100, but this could increase for next year (but it is unlikely to increase to $200,000). All wages, both regular and supplemental, count towards this threshold.
Flat Supplemental Rate: When an individual has received $1 million in supplemental payments, tax on any additional supplemental payments must be withheld at the maximum individual tax rate (currently 35%, but this could increase to 39.6% next year–stay tuned on this one). Only supplemental payments, not regular wages, count towards this threshold.
Medicare: When an individual has received more than $200,000 in wages, the Medicare tax rate increases to 2.35%. All wages, both regular and supplemental, count towards this threshold.
Withholding Mechanics
Because you don’t know participants’ filing statuses (or their spouses’ incomes), you’ll withhold at the higher rate for any employees that have earned more than $200,000, even though they may not yet be liable for the additional tax. Any excess Medicare payments will be sorted out when they file their tax return.
Unlike the supplemental income tax rate, where you can apply the higher rate to an entire payment that straddles the threshold, the higher Medicare rate should only be applied to the portion of the payment that exceeds the threshold. For example, let’s say an employee that has received wages of $190,000 exercises an NQSO at a gain of $40,000. The first $10,000 of gain on the exercise is subject to the standard Medicare rate of 1.45%; only $30,000 of the gain is subject to the 2.35% rate. Then, from that point forward until the end of the year, any further NQSO exercises and award payouts are subject to 2.35% (as well as any other wages paid to the employee).
And, just in case that wasn’t confusing enough, the company’s matching payment remains at 1.45%; the additional tax applies to the employee only.
Next Steps and More Information
If you haven’t started talking to your payroll group about this, now might be a good time to take them lunch. It also might be a good time to ask your administrative provider about how they’ll handle the new rate in their system.
Also, tune in next week, when I’ll discuss planning considerations for employees.
Seattle: Featuring the presentation “Never a Dull Moment — Latest Developments and Trends for Global Equity Plans.” (Wednesday, August 8, 7:30 AM – 9:30 AM)
Sacramento: Elizabeth Dodge presents “Everyday Egregious Errors in Equity Comp Accounting.” (Thursday, August 9, 11:00 AM)
Twin Cities: Corey Rosen presents “Equity Compensation in Closely Held Companies: Survey Data and Design Issues.” (Thursday, August 9, 9:00 AM, webinar only)
NASPP Members Eligible for Discount on CEP Exam If you’ve been thinking about enrolling for the Certified Equity Professional exam, now is the time to do it. Because the NASPP serves on the CEP Institute Advisory Board, we are able to offer NASPP members a $200 discount on the November 3, 2011 exam.*
The CEP program is the certification standard for the equity compensation industry, comprised of a three-level, self-study program in the technical regulatory issues affecting equity compensation.
Visit the CEPI website for more information on the program. To take advantage of the NASPP member discount, contact the CEPI at (408) 554-2187. Don’t wait; registration closes on September 21.
* The Fine Print: Eligible registrations include new Level 1, Level 2 or Level 3 registrations for individuals who are involved in administering or managing their own company’s equity programs. Deferrals and re-tests are not eligible for a discount. Individuals already registered are not eligible for a retroactive discount. Candidates from service providers do not qualify. Questions regarding eligibility can be directed to the CEPI at (408) 554-2187.
Many things in life take on a “hurry up and wait” path, and the SEC’s evaluation of whether or not to incorporate International Financial Reporting Standards (“IFRS”) into U.S. accounting practices is no different. As I write this blog, we are approaching four years since the SEC first issued their proposed road map to IFRS (August 27, 2008) and the acronym IFRS became a buzz word in the stock compensation world.
What’s the Latest News?
On July 13th, the SEC issued a long-awaited staff report that basically summarized their considerations around whether or not the U.S. should adopt IFRS. The key word here is “considerations”. The bottom line of the SEC’s report can be articulated quite simply: the SEC’s report did not contain a recommendation on whether IFRS should be adopted, or a decision and time frame for potential adoption, but rather an analysis of all of the related pros and cons. Where does that leave us? We remain in uncertain territory as to if, when and how IFRS will be adopted (thus the title of this blog). We are still very much in “if” territory, though many accounting experts keeping watch on this issue seem to feel strongly that it’s still a matter of “how” and “when” and not “if”.
No News is….No News!
The IASB has vocalized their impatience surrounding the U.S.’s slow decision making process when it comes to adopting IFRS, so that pressure is undoubtedly mounting. Even so, the prospect of the U.S. adopting IFRS remains on the horizon, and is not something the SEC is likely to decide on before the end of 2012. The good news is that we can turn our attention to more pressing matters (such as what to do about all the tax rate changes that are scheduled to kick in January 1, 2013), and, at least from a stock compensation perspective, not have to worry about looming accounting changes having an impact on us anytime soon.
This is still on the radar, and we’ll keep any updates coming. If you do have spare time, our IFRS2 Portal contains information on many of the considerations on the topic.
NASPP “To Do” List We have so much going on here at the NASPP that it can be hard to keep track of it all, so we keep an ongoing “to do” list for you here in our blog.