You’ve heard it said many times; stock plan administrators must be familiar with their company’s incentive stock plans. In fact, it’s a good idea to have an administrator’s summary of the plan with the major parameters of each plan ready and available for quick reference. But, what does that mean, exactly? What information should you be aware of? Here are some important pieces of information that you should know about each of your company’s plans. Although this is not an exhaustive list, it will give you an idea of what should be detailed in each plan.

First, you should know the date each plan was adopted, and when each will (or did) expire. Whether the plan is currently active or has already passed the expiration date, these dates are important for helping you keep track of grants that may fall within the plan. Once you know the valid dates for your plans, you will want to know the total number of shares available for issuance under the plan. Note whether or not the plan has an “evergreen” provision that automatically increases the number of available shares periodically and if cancelled and/or forfeited shares will return to the pool of available shares.

It is important to know who has the authority to administer the plan. The plan administrator is not the same as the person or group of people who are responsible for the day-to-day administration of the plan, but rather who has the authority to approve grants, determine the payment methods, modify grants, etc. Most plans give administrative authority to a compensation committee, and many also include the ability for the compensation committee to further delegate authority.

The next major item to know is what types of awards are permissible under each plan. Many plans today are omnibus type plans that will allow multiple types of stock grants, even if your company is only granting one type at the moment. Know whether the plan has a bifurcated share pool; if the number of shares for certain types of grants (ISO grants, for example) is allocated separately. You will also want to understand how grants will impact your plan share reserves. For example, is there a one-to-one relationship (one granted share reduces the shares available by one share), or does your plan have a flexible (fungible) share reserve?

Once you know what types of grants are available under each plan, you should determine what payment methods are permissible for both purchase or exercise price and tax withholding. The permissible purchase/exercise methods should be called out in a separate section than the tax withholding methods, but will often include many of the same choices (such as cash, share withholding, or open market sale).

Although plans should not include specific vesting schedules, each should provide a standard for how grant shares will be impacted by both changes in employee status (such as terminations, death, and disability) as well as corporate transactions (such as a merger change in control, or spin-off).

Finally, each plan should state how dividends and dividend equivalents will be handles, even if it is simply at the discretion of the plan administrator. This is true regardless of whether or not your company currently issues dividends.

Take some time this quarter to create a “cheat sheet” for your company’s plans. Make sure you know how each plan deals with all of the issues I’ve listed here, as well as anything else that is called out in your plans. If you have a plan that is missing any of these data points, meet with your legal counsel to discuss the impact and to determine if any changes should be made.

-Rachel