CVS ESPP What are the critical dates?

[MSerforfun]

Hello all

Just a quick question on ESPP holding period. The enrollment period is from May 15, 2016 through June 14, 2016.

What is the date the stock is valued at for the beginning and ending of the offering period? I am thinking the price is measured at the lower of June 15, 2016 or December 14, 2016?

Can I sell the stock on December 14, 2016 or there is a holding period? If you know the answer, please specify the date I can sell the stock for this offering period. Many thanks

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[clf]

I also had a question concerning this...when is the stock purchased? Once yearly in June or once in June and again in December/January?

 

[farmadiazepine]

Someone can correct me if I'm wrong, as I haven't worked for CVS since October of 2014.

You sign up for ESPP. The money is deducted from your paycheck after taxes for the amount you specify up to a maximum of $21,250. CVS will purchase shares for you at a discount, and it will be based on the price of the stock on either January 1 or June 30, whichever stock price is lower. You take the lower of the two prices, and then apply the discount.

You are NOT buying the stock at the lowest price in that period. You are buying either the price on January 1 or June 30, whichever is lower, plus the CVS discount.

You have to hold onto the stock for a certain period of time before you can sell it. I believe it is 1 year? I just know, I held onto the stock for 18 months and then sold it. There is a reason I waited 18 months (I think from date of purchase plus 12 months, but I have 18 months in my head for some reason), but I forget, but it has to do with how it is taxed.

Then you can sell it whenever.

 

[MSerforfun]

You have to hold on to it for six months in order to be able to sell it. The discount is treated as ordinary income immediately once you buy the stock. Once you sell it, Anything beyond the discount is treated as capital gains (or loss) taxed as short-term cap gains if held for less than 18 months or long-term capital gains if held for 18 months or more.

I live in the silicon valley and often, employees participate in dot com ESPPs. Once the employee vest, the discount on the stock is automatically added to the taxable comp. However, employees were bound to hold on to the stock for six months and in downturns, the stock lost value. What made it even worse is that the loss is a capital loss subject to a maximum deduction of $3,000 per year.

IRS is stubborn about this and will not change its mind about this treatment.

 

[mentos]

You have to hold on to it for six months in order to be able to sell it. The discount is treated as ordinary income immediately once you buy the stock. Once you sell it, Anything beyond the discount is treated as capital gains (or loss) taxed as short-term cap gains if held for less than 18 months or long-term capital gains if held for 18 months or more.

I live in the silicon valley and often, employees participate in dot com ESPPs. Once the employee vest, the discount on the stock is automatically added to the taxable comp. However, employees were bound to hold on to the stock for six months and in downturns, the stock lost value. What made it even worse is that the loss is a capital loss subject to a maximum deduction of $3,000 per year.

IRS is stubborn about this and will not change its mind about this treatment.

It's only a loss if they sold, right? Why didn't they hold it and sell high?

 

[pezdispenser]

You have to hold on to it for six months in order to be able to sell it. The discount is treated as ordinary income immediately once you buy the stock. Once you sell it, Anything beyond the discount is treated as capital gains (or loss) taxed as short-term cap gains if held for less than 18 months or long-term capital gains if held for 18 months or more.

I live in the silicon valley and often, employees participate in dot com ESPPs. Once the employee vest, the discount on the stock is automatically added to the taxable comp. However, employees were bound to hold on to the stock for six months and in downturns, the stock lost value. What made it even worse is that the loss is a capital loss subject to a maximum deduction of $3,000 per year.

IRS is stubborn about this and will not change its mind about this treatment.

Well there are actually 2 types of ESPP:
1. Qualified Section 423 ESPP: you don't pay taxes until you sell. The Walgreens ESPP is a qualified plan, and I think the CVS one is as well. There are limits to being a qualified plan such as max $25k/yr, max 15% discount.
2. Non-qualified ESPP: you pay income tax on the discount when you buy the stock.

http://personal.fidelity.com/products/stockoptions/faqpurchase.shtml

 

[sosoo]

is the discount still at 15%? i thought they reduced it, thats why i stopped contributing to ESPP. also with a high turnover rate at cvs, are u really going to keep it for 2 years? anything less and there's no tax benefits buying/selling.

 

[MSerforfun]

is the discount still at 15%? i thought they reduced it, thats why i stopped contributing to ESPP. also with a high turnover rate at cvs, are u really going to keep it for 2 years? anything less and there's no tax benefits buying/selling.

The discount is 10%. Was reduced about a year ago from 15%.

If you are no longer working for CVS, they simply refund your uninvested contributions.

 

[MSerforfun]

Well there are actually 2 types of ESPP:
1. Qualified Section 423 ESPP: you don't pay taxes until you sell. The Walgreens ESPP is a qualified plan, and I think the CVS one is as well. There are limits to being a qualified plan such as max $25k/yr, max 15% discount.
2. Non-qualified ESPP: you pay income tax on the discount when you buy the stock.

http://personal.fidelity.com/products/stockoptions/faqpurchase.shtml

My bad, yes, the discount is taxed at time of sale and not at purchase date.

 

[MSerforfun]

Speaking of which, does anyone know when CVS will deposit our contributions into our ESPP account. Right now, it is setup with a holding company called "Computer Share" but I don't see my contributions that I made in 2016 (I participated the second half of 2016 only) with the holding company. Does anyone know?

 

[SmallPharma]

Possibly by the end of the month?

 

[mentos]

You can see your Dec 2016 shares in Computershare now.

 

[stevephhs016]

Can anyone explain how ESPP really works? The money they took out of my paycheck (for the 2016 year) doesn't really match the current amount in computershare. Is that based on the current stock price?