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Directions 2005
Action Required:
Forms W-8BEN Are Expiring and Must Be Renewed
On December 31, 2004, Forms W-8BEN will expire for employees who
have not certified their foreign tax status within the last three
years. To avoid backup withholding and account restrictions (see
details below), these individuals are required by the Internal Revenue
Service (IRS) to recertify their foreign person status.
We sent a reminder message to all impacted participants on December
6, 2004. Employees can quickly and easily complete their form online
by logging on to optionslink.com and following a simple, guided
process to update their accounts.
Employees without access to optionslink.com can submit a paper
Form W-8BEN. The form is available under the Download Forms section
of optionslink.com. You may want to distribute copies of this form
to your international employees who do not have access to the OptionsLink
Web site.
To help you determine which of your employees are impacted by this
IRS regulation, a report of all employees with an expiring Form
W-8BEN is available at the Client Service Center (corpservices.etrade.com/csc).
Look for the “NoW8BEN” report dated after 12/01/04 on
the Other Files and Reports page (Administration | Pick Up Files
and Reports | Other Files and Reports).
Important Information About Backup Withholding and Account
Restriction
- Participants who have not certified their accounts by December
31, 2004 will be subject to withholding of up to 30% on any dividends
paid, interest earned, or gross proceeds received from sale of
stock.
- Because withholding is on the gross proceeds of a stock sale
and not the net proceeds from an option exercise and sale, employees
could incur a sizable tax liability and a potential negative account
balance.
- To protect you and your employees, precautionary measures are
in place to mitigate the occurrence of backup withholding on these
accounts. Starting on December 1, 2004, we will restrict trades
placed online and through the IVR for any account that requires
recertification. Trades can still be placed through a live broker
who will inform the customer that they could be subject to backup
withholding if they do not recertify before any trades are executed.
- When an employee with a restricted account logs on to OptionsLink
after December 1, 2004, they will see a link in their Task List
prompting them to go through the online W-8BEN recertification
process, which should only take a few minutes to complete.
- Once the employee completes the online recertification process,
the trade restriction will be removed immediately and the account
will not be subject to backup withholding. Employees submitting
paper forms will be able to trade as soon as their form is processed.
Employees should anticipate 7-10 business days from the time we
receive their paperwork for the restriction to be removed.
Questions? Please contact Corporate Support at corporatesupport@etrade.com.
Please add your Corporate Identification number when
you e-mail.
Catch Up on Dispositions
With Our Comprehensive File Downloads
For the convenience of our OptionsLink clients, we are providing
files that include all dispositions of incentive stock option and
employee stock purchase plan shares from January 1, 2004 through
November 30, 2004. These files are posted on the Client Service
Center. The file names follow the standard file format (UPE, Shares.trn,
ISO Disposition, and ISO Transfer) with JANO4-NOV04 appended to
the front (e.g., JAN04-NOV04Shares.trn).
These files report dispositions that have already been included
in standard monthly files. You can use these files to verify that
you have entered/imported dispositions from each monthly report,
or—if you have not been using the monthly files—to enter
all your dispositions through November 2004. When using the new
files, be careful not to enter or import any dispositions that you
have already entered into Equity Edge. You can run the following
Equity Edge reports to determine whether you have already entered
the dispositions:
ISOs:
- Disqualifying Dispositions (compare to ISODisposition report)
- Dispositions – Pending (compare to ISOTransfer report)
ESPPs:
- Dispositions – Pending Disqualifying (compare to Shares.trn
report)
- Dispositions – Pending Qualifying (compare to Shares.trn
report)
- Dispositions – Disqualifying (compare to UPE file)
- Dispositions – Qualifying (compare to UPE file)
The standard monthly file for dispositions occurring in December
2004 will be available on January 1, 2005.
Update
Your Tax Information for 2005
Now is the time to update tax information for Equity Edge and OptionsLink.
Equity Edge
The 2005 Social Security tax limit has been set at $5,580—based
on maximum wages subject to tax of $90,000—which is higher
than the 2004 limit of $5,449.80. When you reset your year-to-date
withholding to $0, be sure to update the tax limit in Equity Edge.
Simply open the Tax Table (Table | Tax) and enter $5,580 in the
Limit field.
Be sure to modify the existing rate rather than entering a new rate.
By modifying the existing rate, the change is automatically applied
to any accounts associated with that rate, but is not applied to
any existing exercise records.
OptionsLink
Be sure you have also reset tax rates and YTD tax limits in OptionsLink,
so tax calculations for Cash Exercises and Sell to Covers are estimated
appropriately. You can easily reset this tax information by sending
a complete Option Account File (GE file with "changes only"
unchecked) that includes updated tax rates and YTD tax limits.
OptionsLink
is moving to etrade.com
We are pleased to announce that OptionsLink is moving to etrade.com.
Under the new, dedicated Employee Stock Plans tab (etrade.com/stockplans),
employees can manage their stock plan benefits—as they would
today at optionslink.com—but have access to additional tools
and benefits at etrade.com:
- At-a-glance Company Info Center: Employees
can view important company messages, plan documents, and news—all
from a single location.
- Easy-to-use Plan Elections Center: Employees
can accept and view grants, enroll in an ESPP plan, and more at
this new hub.
- Enhanced Educational Tools: Employees can
make smarter financial decisions and reach their financial goals
with our educational tools and content, including support for
asset allocation and retirement planning needs.
- Integrated and Centralized Information: Employees
can better manage their overall finances by accessing consolidated
account information—from ESPP shares gains to checking account
balances—in one, centralized location at etrade.com.
By retiring optionslink.com and using our etrade.com technology,
resources, and services, you and your employees benefit with a more
robust full-service Web site. More details are available in our
Frequently
Asked Questions document.
Timing
Beginning in January 2005, your employees will have the choice to
manage their stock plan benefits at the new Employee Stock Plans
tab at etrade.com or at optionslink.com. In the spring of 2005,
we will retire optionslink.com and automatically direct your employees
to the Employee Stock Plans tab. Every step of the way, our dedicated
customer service team will be ready to respond to any of your employees’
stock plan inquiries. This transition period will provide your employees
with time to explore the new site and minimize any confusion.
Helping Your Employees Understand the Changes
Communicating with your employees ahead of time will help ensure
a smooth transition. We have provided a sample
employee letter that you can use to notify your employees directly
of these changes.
After January 6, 2005, employees who activate their stock plan
accounts will be directed to the new Employee Stock Plans tab at
etrade.com—and not optionslink.com. If you have internal materials
(e.g., FAQs, content on your intranet, etc.) that reference OptionsLink,
we recommend that you update them over the next three months to
avoid any employee confusion (see our Frequently Asked Questions
document for more details).
In the meantime, if any of your employees have questions or ask
you for additional information, please have them contact our dedicated
customer service team at stockplans@etrade.com
or by calling 1-800-838-0908 (+1 650 599 0125 from outside the U.S.).
Final ISO
Regulations
The IRS recently released final regulations on incentive
stock options (ISOs) that clarify existing guidance. We have highlighted
four of the provisions of interest below.
Early Exercise of ISO Shares
The final regulations provide clarification on the tax impact upon
exercise of unvested ISO shares.
- The exercise of unvested shares constitutes a transfer of the
shares for purposes of calculating the disqualifying disposition
holding period.
- In connection with an early exercise, the optionee may make
an 83(b) election with respect to AMT only.
- In the event of a disqualifying disposition, the amount of compensation
income the individual recognizes is calculated as the spread between
the market value of the stock at vest date and the option price.
- The holding period for capital gains purposes begins on vest
date, rather than exercise date.
The following reports in Equity Edge 5 and higher can calculate
the gain for disqualifying dispositions as of the vest date or exercise
date: Disqualifying Dispositions report, Tax Summary report, and
Payroll Summary report. Before running these reports, be sure to
select the proper date for gain calculations by using the “Unvested
Exercises with 83(b)” prompt on the Report | Run
window.
Broker Fees on ISO Transactions
The amount of compensation recognized by an individual in a disqualifying
disposition of ISO shares is limited to the actual amount realized
on the sale of the stock. Previous guidance indicated that broker
fees could be subtracted from the sale price if the amount realized
was less than the gain at exercise. The final rules make it clear
that compensation income is calculated without the reduction for
brokerage or other fees, with the possible result of a capital loss
for the broker fees or other costs.
Impact of Cancellations on $100,000 Limit
Previous guidance allowed companies to exclude any cancelled shares
from the $100,000 limit if the date the shares would be first exercisable
occurred after the cancellation date. The final regulations specify
that all shares that would have become first exercisable in a calendar
year must be included in the $100,000 limit calculation, even if
the shares are cancelled before the exercisable date is reached.
Effective Date and Transition Rules
The final regulations became effective August 3, 2004. However,
companies are provided a limited window to determine when they need
to begin adhering to the new regulations. Companies generally may
continue to rely on the 2003 proposed regulations (and, in some
circumstances, prior proposed regulations) until the earlier of
January 1, 2006 or the first regularly scheduled shareholders meeting
occurring at least six months after August 3, 2004.
Equity Edge Support
Equity Edge 6 will have enhanced functionality to reflect the interpretations
noted above. We suggest updating to the latest version as soon as
it is available and determine (with your legal and audit counsel)
the appropriate date for adoption of the new regulations.
E*TRADE FINANCIAL encourages you to discuss the final regulations
with your legal and audit counsel to ensure proper adoption and
implementation of all provisions of the regulations.
Administering
Your Employee Stock Plans in Italy
On May 10, 2004, the Italian CONSOB, responsible for regulating
the Italian securities market, issued a ruling (CONSOB Ruling no.
DIS/4045379) addressing sales of securities associated with employee
stock plans. Based on interpretations, U.S. companies are required
to A) work through a licensed intermediary in Italy to enable Italian
employees to sell employee stock plan issued securities, and B)
have the intermediary conduct a suitability review prior to allowing
their Italian employees to participate in their stock plans.
How does this affect your company?
Depending on your counsel’s opinion, your company may need
to sign an agreement with a licensed financial intermediary in Italy.
The responsibility for complying with this ruling is placed on the
issuer, not on the financial intermediary or U.S. brokerage firms.
Companies that do not have a signed agreement with an Italian intermediary
may be considered non-compliant and run the risk of having their
employee stock plan(s) in Italy suspended by the CONSOB until an
intermediary is appointed.
How can we help?
E*TRADE FINANCIAL Corporate Services is currently developing a solution/service
to help you comply with the new regulations. More details to follow,
and additional fees for this service may apply.
If you are interested in learning more, please contact Corporate
Support at corporatesupport@etrade.com3 so that we can contact you when the solution
is finalized.
Note: The contents provided should
not be considered, as legal, tax or accounting advice. You should
consult your own advisors before deciding what, if any, course of
action to take in relation to your own particular situation.
American
Jobs Creation Act of 2004
The American Jobs Creation Act of 2004 (AJCA) was signed into law
on October 22, 2004. This new tax legislation contains provisions
that potentially impact the design and administration of equity
compensation plans and other forms of executive compensation. While
the US Treasury Department is still analyzing the bill, and is expected
to issue guidance on adopting the new law (by the end of December
2004), plan administrators need to be aware of the potential impact
of the new provisions.
We are closely monitoring the Treasury for guidance and preparing
a white paper to discuss the Act’s implications on equity
compensation once final guidance from the Treasury is released.
We will keep you informed as announcements are made.
What can you do?
- Contact your auditing firm to discuss the issue and their interpretation
of the existing guidance.
- Watch for Treasury guidance.
Local
Language, Local Hours, Local Toll Free
To better meet the needs of our customers with a large base
of Asian employees, we have launched a new Asian call center. Employees
based in Asia can call toll-free and speak directly with licensed
OptionsLink representatives fluent in Cantonese, Mandarin, and English.
Other languages will be supported using our live translation services.
Local business hours
Financial service representatives are available Monday through Friday,
7:00am to 2:00pm, Hong Kong time.
Toll-free numbers
Toll-free service from Hong Kong and Japan is now live.
- Hong Kong: 001-800-3338-7233
- Japan: 010-800-3338-7233
Toll-free service will be added for the following countries by
the end of December: China, Taiwan, Singapore, Malaysia, Korea,
India, Philippines and Thailand. Country-specific access codes will
be posted on the Contact Us page on the OptionsLink website when
available.
Employees outside of the toll-free zones can continue to receive
support by calling our domestic number: 650-599-0125.
For US-based Chinese-speaking participants, we also have customer
service representatives fluent in Mandarin and Cantonese available
during normal customer service hours.
Employee Communications
To help you communicate the new changes to your employees, we have
prepared email templates in both English and Chinese that describe
the new call center features. Click the links below to download
the templates. (Note: To view the Chinese versions correctly,
you must have Chinese characters installed.)
European Call Center
Our European call center is in development and scheduled to open
in Q1, 2005. Look for more information on this service in the next
issue of Product News.
IVR Enhancements
To improve service to your employees, we are launching several
enhancements to the IVR system over the next two months.
This month, we are removing the prompt “to speak to a customer
representative, press 0” from the top-level menu of the IVR
system. We will now be encouraging participants to identify themselves
through the IVR system before opting out to Customer Service. This
will allow us to provide faster, more targeted support. After identifying
themselves, they can press ‘0’ for assistance.
Starting in January, employees will be able to automatically reset
their password or reissue an account authentication code through
the IVR system. The new passwords and authentication codes that
are generated will be sent to the email address on file for the
employee. Additionally, to provide premium service and support to
your most important employees, the IVR system will automatically
route calls from your company executives and insiders to our Executive
Services team.
Looking for a
few good…Equity Edge 6 Beta Testers
Do you grant Restricted Stock Units with Deferrals? Are you eagerly
anticipating improved Restricted Stock reporting? Are you dying
to get your hands on the updated valuation functionality for the
new accounting standard?
If so, we are now accepting applications for Equity Edge 6 Beta
Testers. Get a head start with a sneak peak at the new restricted
stock and accounting functionality included in Equity Edge 6!
The Beta program is planned to begin in mid-February 2005 and will
run for approximately four weeks. If you are interested, please
send an email to eebeta@etrade.com.
Beta Testing Requirements
- 1 to 2 hours per week for installation and testing of new program
features and reports and providing feedback
- Available Test system with the following minimum system requirements
(Equity Edge 6 Beta Version may NOT be installed on a production
system)*
- Operating System
- Windows NT 4.0 Workstation (Service Pack 6 or higher)
- Windows NT 4.0 Server
- Windows 2000 Professional (Service Pack 4 or higher)
- Windows 2000 Server
- Windows XP Professional
- Windows 2003 Server
- RAM (Memory): 512 MB
- Processor Speed: Pentium 4 - 2 GHz
- Free Disk Space: 5 GB
*Note: These system requirements are recommended minimums for
the Workgroup Edition of Equity Edge 6. Requirements for the Enterprise
Edition will vary. Contact us at eebeta@etrade.com
for more information.
Tell Us
How to Serve You Better and Enter to Win!
We’re asking for a few moments of your time to complete
a brief survey on the Client Service Center.
Our online Client Service Center gives clients access to valuable
tools and information and we’re looking for your feedback
to improve the existing functionality and expand the features to
benefit our Equity Edge and outsourcing clients. By completing this
survey, you can help us determine the importance of features and
functionality such as accessing an online knowledge base, applying
grant-level blocking, and creating custom reports.
Please take this opportunity to help us improve the Client Service
Center and as a special thanks, we’ll enter your name in a
drawing for a chance to win your choice of an Apple® iPod®
Mini* valued at $250 or a $250 donation in your name to the Ronald
McDonald House Charities.
Please click here
to begin the survey.
* No purchase is necessary. Click here
for rules
Calendar
San Diego User Group - Feb 8, 2005
Directions 2005 - May 1-4, 2005
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