Government Shutdown

We’ve gotten a two-week reprieve from the risk of a U.S. government shutdown, leaving everyone to worry over what a shutdown would mean exactly. First, it certainly doesn’t mean that everyone working for the government just stays home and that the machine of the U.S. governmental infrastructure comes to a screeching halt. Only non-essential functions would be suspended. In the world of stock plan administration, we are most interested in whether or not the SEC and the IRS will still function normally. Most importantly, will we be able to file required forms through the SEC’s EDGAR and the IRS’s FIRE system? I’m sure our partners in the Payroll department are also wondering if they will still be able to submit payroll withholding through EFTPS (or, more likely, that the service provider they are using will be able to), but don’t worry, I’m sure that the government will consider functions that bring tax money in are essential.

The truth is that nobody really knows, but we can all speculate. There hasn’t been a government shutdown since 1995 and the rules for determining which government positions are considered nonessential haven’t been updated since the 80’s. One section that is already covered is that all “activities essential to the preservation of the essential elements of the money and banking system of the United States, including borrowing and tax collection activities of the Treasury” are included in the list of essential government functions. This could potentially cover the personnel required to run both the electronic filings for the IRS, including the forms 3921 and 3922 if you haven’t taken care of that already. What probably won’t be deemed “essential” are personnel to help answer any questions you might have. According to this article, the SEC is already working on a contingency plan that would include stopping all audit processes, but I assume would keep EDGAR up and running. So, we are in a “wait and see” mode right now, both on whether or not a shutdown will take place and what exactly that would mean for stock plan managers.

On a related note, one of the fears expressed in this article is the threat posed by a lack of cyber-security in the event of a government shutdown; the list of critical-need computer security employees hasn’t been updated since 1995. With how much we rely on electronic filing in the world of equity compensation, that also has me a little concerned.

Electrifying Section 6039

Speaking of electronic filing, many companies that had originally planned on submitting paper returns the IRS have either requested an extension or decided to go ahead and file electronically. If you either missed the February 28th deadline to file for an extension or have decided to brave the electronic filing, you’re now faced with the problem of actually creating the file to submit through the IRS’s FIRE system.

Unfortunately, if you weren’t expecting to file electronically, then I suspect you didn’t send a test file to the IRS while the test files were still being accepted. This means that you have two choices: 1) engage a service provider to create and/or submit file on your behalf or 2) create the file yourself and hope you get it right. The first choice is, of course, the easiest. To make it even easier, the NASPP has a great matrix of service providers who are prepared to help you through this from our November 18th webcast. If you decide to go it alone without a test file, we can still help. Stock & Option Solutions recently provided NASPP members with an example of what the files for forms 3921 and 3922 should look like. Whatever your decision, the NASPP has got you covered!

-Rachel