Employee Stock Purchase Plan

An Employee Stock Purchase Plan gives employee the opportunity to purchase stock in the company where they work. Many companies offer an Employee Stock Purchase Plan and encourage employee participation. An Employee Stock Purchase Plan may be part of a qualified retirement plan or simply be a benefit offered by the company. The share purchase price for purchases through an Employee Stock Purchase Plan can be as much as 15% below market price. In addition, many companies offer a lookback provision. In this type of Employee Stock Purchase Plan, if the stock price increases during the plan offering period, Employee Stock Purchase Plan participants buy shares at the lower price from the beginning of the period. The typical Employee Stock Purchase Plan also offers favorable tax treatment. No income is reported when shares are purchased for an Employee Stock Purchase Plan even if shares are acquired below market price. In addition, an Employee Stock Purchase Plan is not subject to the alternative minimum tax. The typical Employee Stock Purchase Plan requires employees to sign up by a particular date then witholds money from their paychecks for stock purchases.