# Employee Share Purchase Plans



## Dmoney (Apr 28, 2011)

Just reading one of the threads with a couple comments about the big banks' ESPPs and was wondering how many people have access to a plan and what the limits/benefits are?

My company will match my contribution dollar for dollar up to $3,000. As long as I don't take out more than I put in, the company will continue to leave their share in, and will continue to contribute. I figure as long as the shares don't drop by more than 50% it's a pretty easy decision to make. If the shares don't move at all, it's like a $3,000 raise. 

What kind of other offers are out there?


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## daddybigbucks (Jan 30, 2011)

It is a good deal when you are starting out.
$3000 is a lot
But when you have more than $50000 in your rrsp plan, you can easily get more than $3000 in dividends. 
then those company plans start working against you because they are locked in.
That's the way I see it and happier outside them.


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## Dmoney (Apr 28, 2011)

daddybigbucks said:


> then those company plans start working against you because they are locked in.


Mine is only locked in for I think a year or two, and it's only the company's contribution that's locked in. Regardless of the amount of money I have, I'll always take the free $3K, provided I don't think the stock's going down by more than 50%.

I know some are much more restrictive in which case it might be less advisable to participate.


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## daddybigbucks (Jan 30, 2011)

Dmoney said:


> Mine is only locked in for I think a year or two, and it's only the company's contribution that's locked in. Regardless of the amount of money I have, I'll always take the free $3K, provided I don't think the stock's going down by more than 50%.
> 
> I know some are much more restrictive in which case it might be less advisable to participate.


better check on that.
my wife plan is that she has all the money locked in unless she quits or some extreme reason.

You are right though, in some circumstances it works great. 100% return every year is pretty amazing.
Then you can do your own investing on the side.


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## KaeJS (Sep 28, 2010)

Match $0.50 for ever $1.00 you contribute, up to a maximum of 3% of your Gross Salary.

Example:

If your Gross Salary is $50,000, you contribute $3,000, they contribute $1,500.

Your shares are never locked in. The shares the company matches are locked for 2 years.

Dividends are accrued and re-invested. The dividends made on the companies contributions will also be revoked, should you quit/get fired before 2 years.


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## Dmoney (Apr 28, 2011)

KaeJS, any limit on the contribution amount once salaries crash through the roof?

Say an I-banker is making 350K, can he still contribute 3% that gets matched? Granted with that kind of money it's likely he doesn't care.


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## mind_business (Sep 24, 2011)

Employee contributes 6% max into RRSP. Company matches 3% in non-RRSP. Vested after 2 years. No maximum salary limit.


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## jcgd (Oct 30, 2011)

Mine seems pretty good. Group RRSP matching up to $1.50/h and they match 100% of stock purchased, but to 5% of your salary.

You can can pull it whenever you want. Assuming the stock stays flat they will essentially give you about 9% of your salary per year for retirement.


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## KaeJS (Sep 28, 2010)

Dmoney said:


> KaeJS, any limit on the contribution amount once salaries crash through the roof?
> 
> Say an I-banker is making 350K, can he still contribute 3% that gets matched? Granted with that kind of money it's likely he doesn't care.


AFAIK, it's not capped.

So, if you make $350k a year gross, you can contribute $21k and they will match $10.5k.

So if you make $350k, you really make $360k LOL


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## Spudd (Oct 11, 2011)

Our company matches 50% of stock we buy up to 5% of salary. It's locked in for 5 years, after which you can take it all out. It's not an RRSP, it's unregistered. Dividends are re-invested. 

I max mine out... can't beat a 50% return. Our stock price has been the same for like the last 5 years... so essentially it's a straight 50% plus the 3% dividend. I take out all the vested money once a year so I don't get massively overweighted in my company's stock.


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## Lephturn (Aug 31, 2009)

Regardless of the plan, if you wind up highly concentrated in your company's stock, I would look at protecting that from losses. I would collar it, even if I had to run the options in a separate account. Failing that just spend the money on the puts.

Yes, it will cost you some of your return to insure your stock against losses - but it's worth it. So much of your financial life is already tied up with that company that you should protect any company stock you have from either losses due to the price declining, or losses because you get fired/laid off, whatever.

If your company is private, or is not option-able you are stuck for a direct hedge, but if there is a highly correlated public company that has options available you could always buy puts on that to hedge some of your risk out.


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## dcaron (Jul 23, 2009)

Very wise recommendations in this thread.

Plan to diversify your "income portfolio" as soon as you can. Dont depend on you salary, and accumulate employer shares for extended periods. Dont sit on your employer shares, but do cash them out once a year, or when you are allowed to vest them, which is typically 2 years after you entre the program.

My employer's (Canadian Bank) contribution ceiling is $2250/year, and they match 50% of stock we buy up to 3% of salary. It's not locked in (after initial 2 year vesting period), and you can take it all out. The employer's portion is unregistered, the employee's portion is registered. I "empty" (move to personal bank account + SDRSP) both accounts once a year, lather, rinse, and repeat ...


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## Rysto (Nov 22, 2010)

Lephturn said:


> Regardless of the plan, if you wind up highly concentrated in your company's stock, I would look at protecting that from losses. I would collar it, even if I had to run the options in a separate account. Failing that just spend the money on the puts.
> 
> Yes, it will cost you some of your return to insure your stock against losses - but it's worth it. So much of your financial life is already tied up with that company that you should protect any company stock you have from either losses due to the price declining, or losses because you get fired/laid off, whatever.
> 
> If your company is private, or is not option-able you are stuck for a direct hedge, but if there is a highly correlated public company that has options available you could always buy puts on that to hedge some of your risk out.


I have trouble believing that there is a single public company out there where trading in options on the company's stock wouldn't be considered a violation of the insider trading policy, no matter what your intentions are.


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## Lephturn (Aug 31, 2009)

Rysto said:


> I have trouble believing that there is a single public company out there where trading in options on the company's stock wouldn't be considered a violation of the insider trading policy, no matter what your intentions are.


Really... so the share purchase programs, vesting the shares, and selling them (or buying more) are fine? There is no difference between buying and selling the shares and trading the options contracts.

I've only once worked for a publicly traded company - so those with more knowledge feel free to correct me. Even the top executives buy and sell stock, they simply have to report those transactions and they cannot do it based on non-public information. There are other restrictions I'm sure, but they certainly do trade the security. Or are you saying there is additional special restrictions on options contracts?


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## Square Root (Jan 30, 2010)

There are significant restrictions on transacting in bank shares as an employee. It's been a while since I retired but I think the bank act resticted employees from trading options on their employer shares. Other restictions related to trading windows around earnings releases, minimum share ownership requirements for senior execs, dislosure of all transactions and pre clearance from their internal compliance dept. In aggregate it was a very controlled process.


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## CanadianCapitalist (Mar 31, 2009)

Lephturn said:


> Really... so the share purchase programs, vesting the shares, and selling them (or buying more) are fine? There is no difference between buying and selling the shares and trading the options contracts.


Typically, public companies prohibit short selling or buying puts for *all* employees.


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## atrp2biz (Sep 22, 2010)

Selling puts or buying puts?

Alternatively, how would covered calls be looked upon?


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## CanadianCapitalist (Mar 31, 2009)

atrp2biz said:


> Selling puts or buying puts?
> 
> Alternatively, how would covered calls be looked upon?


The regulations at my employer is worded:

"Short sales are prohibited. Option positions simulating a short position are prohibited."

I guess that would mean buying puts?


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## Lephturn (Aug 31, 2009)

CanadianCapitalist said:


> The regulations at my employer is worded:
> 
> "Short sales are prohibited. Option positions simulating a short position are prohibited."
> 
> I guess that would mean buying puts?


As I read this buying puts is fine.

Technically an option position simulating a short position would be a spread where you sell a call and buy a put at the same time. That is synthetic short stock. Anything else I do does not simulate a short position even if it is net bearish. To me this means that I can run a collar, buy puts married to stock, etc. This also means you can sell puts as this is a bullish position that is technically the same as a limit order that you get paid for.

I think you can even simply buy puts. It's bearish, but that does NOT simulate a short position. With a short position you lose money as the stock moves higher, and buying puts does not do this. As long as you don't use options to build a synthetic short position you are fine according to this policy. Protecting your holdings with puts, writing covered calls, and running collars is OK.


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## KaeJS (Sep 28, 2010)

Not sure about the options, but I had to sign a document saying I would not short the company stock.

Which is understandable.


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## JimmyAAA (Mar 28, 2011)

Employer (CN Rail) contributes additional 33% of whatever employee contributes. Max employee contribution is 6% of gross salary. Can contribute up to 10% but CN will only match up to 6%. 

No vesting on ANY Shares. Can be cashed tomorrow. 

Dividends are reinvested. Effectively a DRIP that is not available to the public. 

No cost to employee to run plan, but flat $35 to sell shares. 

And best deal of all - It`s CN, not CP.


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## KaeJS (Sep 28, 2010)

JimmyAAA said:


> And best deal of all - It`s CN, not CP.


*LOL!*


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## Argonaut (Dec 7, 2010)

Jimmy, what a great company to work for. Reminds me of Atlas Shrugged, in a good way of course.


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## shanewarne (Dec 1, 2011)

It might seems pretty good. Group RRSP matching up to $1.50/h and they match 100% of stock purchased, but to 5% of your salary.

You can can pull it whenever you want. Assuming the stock stays flat they will essentially give you about 9% of your salary per year for retirement.


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## w0nger (Mar 15, 2010)

hmmm... this is my company's ESP

they will match 100% of my contributions up to a maximum of 20% of my annual salary, vested for 1 year. Dividends are DRIP'd in the account.

after the vestment period i usually transfer both the RSP and non-RSP portion to my TDW account cause I have more control.


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## Dmoney (Apr 28, 2011)

With no limit on your contribution other than 20% of your salary??????

So if you make 50K you can put in 10K and the company gives you another 10K?

You make 100K, you put 20K and company puts 20K?

That's extremely generous if there's no cap.


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## w0nger (Mar 15, 2010)

Dmoney said:


> With no limit on your contribution other than 20% of your salary??????
> 
> So if you make 50K you can put in 10K and the company gives you another 10K?
> 
> ...


that is correct


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## Spudd (Oct 11, 2011)

Wow, I want to work for your company!


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## w0nger (Mar 15, 2010)

Spudd said:


> Wow, I want to work for your company!


yup... i do work for a great company...


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