Fidelity Outlines Top Five Overlooked Benefits Of Employee Stock Purchase Plans

Plan Participation Lags Other Employer Benefits and Remain Overlooked by Many American Workers

BOSTON – Fidelity Investments outlined five key benefits of employee stock purchase plans (ESPP) to help workers better understand these plans that continue to have lower participation rates than other employer benefits.

According to recent research from Fidelity, improving economic conditions and a strengthening job market are prompting many U.S. companies to enhance their employee stock purchase plans in an effort to improve their benefits package. However, participation rate in these plans remains fairly low. According to a 2011 survey from the National Association of Stock Plan Professionals, two-thirds (66 percent) of companies surveyed1 reported an employee participation rate of 40 percent or less.

Following are the top five overlooked benefits of employee stock purchase plans:

1. Employee stock purchase plans allow employees to buy company stock at a discount. Most ESPPs offer employees the chance to purchase company stock at a discount – usually between five and fifteen percent. This means an employee is likely to make money on the shares they purchase. Plus, if the stock price drops, employees can still take advantage of dollar-cost averaging. And according to a 2012 Fidelity survey2, many companies are planning to increase their discount over the next few years, meaning that the savings will be that much greater.

2. Employees can contribute automatically through payroll deductions, just like with their 401(k). Once an employee enrolls in an ESPP and sets their contribution rate, funds are automatically withdrawn from their paycheck and applied to the purchase of company stock. Employees can generally enroll online, and can monitor and manage their account through their plan service provider’s web site. And many companies allow employees to contribute as little as one percent of their paycheck, which makes ESPPs that much more affordable for a greater number of workers.

3. An employee stock purchase plan is another way to save for retirement. ESPPs can complement workplace savings plans and provide a simple way for employees to diversify their retirement investment efforts, as well as gain some ownership in their company. A 2012 Fidelity Investments survey3 found that the majority (57 percent) of company stock plan assets are being earmarked by employees for eventual retirement savings or alternate investment.

4. An increasing number of workers have access to company stock. This is due to the growth of ESPPs as well as the increasing number of companies being publicly traded. According to a recent study4, 40 percent of companies that recently went through an initial public offering implemented an ESPP, and all of those companies offered their company’s stock at a 15 percent discount. Additional studies5 have shown that an increasing number of companies view employee stock purchase plans as a great tool to attract and retain talent, as well as improve employee morale and enhance their overall company benefits package.

5. Savings within a company stock plan are more accessible than savings within a 401(k). Although taxes may still apply, workers can access the assets within an ESPP without the penalties and/or repayment requirements incurred when they take a loan or withdrawal from their 401(k) account. And savings from an employee stock purchase plan can be applied to a variety of financial needs, such as a down payment for a home, a home improvement project, tuition payments, or other “life” expenses.

“Many employees tend to overlook the benefits of an employee stock purchase plan, which range from providing a quick and easy way to purchase company stock at a discount to serving as a great complement to traditional retirement savings accounts,” said Kevin Barry, executive vice president, Stock Plan Services at Fidelity Investments. “Anyone that has access to one of these plans should consider taking full advantage of the benefits by enrolling and adding an ESPP to their overall financial plan.”

Fidelity is a leading provider of stock plan administration services in the United States. It services 250 employers nationwide, representing $125 billion in grant value.

About Fidelity Investments
Fidelity Investments is one of the world’s largest providers of financial services, with assets under administration of $4.2 trillion, including managed assets of $1.8 trillion, as of May 31, 2013. Founded in 1946, the firm is a leading provider of investment management, retirement planning, portfolio guidance, brokerage, benefits outsourcing and many other financial products and services to more than 20 million individuals and institutions, as well as through 5,000 financial intermediary firms. For more information about Fidelity Investments, visit www.fidelity.com.

1 “2011 Domestic Stock Plan Administration Survey” conducted by the National Association of Stock Plan Professionals (NASPP).
2 Study conducted by Richard Day Research/Market Probe of Chicago online between December 18 and 28, 2012.
3 Respondents were decision makers regarding the administration of at least one of these plan types: restricted stock, stock option plans and employee stock purchase plans.
4 Study conducted by Richard Day Research/Market Probe of Chicago online between Jan. 31 and Feb. 21, 2012. Participants were from three plan types: restricted stock, stock option plans and employee stock purchase plans.

“2013 IPO Executive Compensation Study,” Connell & Partners. Study is comprised of 46 companies in the high technology, biotechnology and alternative energy arena that went public in the year 2011 and have since released proxy data for that year.

Study conducted by Richard Day Research/Market Probe of Chicago online between December 18 and 28, 2012.
Respondents were decision makers regarding the administration of at least one of these plan types: restricted stock, stock option plans and employee stock purchase plans.


Stock plan recordkeeping and administrative services are provided by Fidelity Stock Plan Services, LLC.

Fidelity Brokerage Services LLC, Member NYSE, SIPC
900 Salem Street, Smithfield, RI 02917

Fidelity Investments Institutional Services Company, Inc.
500 Salem St., Smithfield, RI 02917

654924.1.0
©2013 FMR LLC. All rights reserved.