Improving economic conditions and a stronger job market are leading U.S. companies to make moves to enhance their employee stock purchase plans, according to a Fidelity survey.
Some 51% of respondents said they intend to modify their employee stock purchase plans in the next two to three years. Of those that will modify, 31% will either introduce or increase the employee discount on stock or add a “look back” provision.
The employee discount is typically 10% to 15%, said Joan Bloom, senior vice president in Fidelity's stock plan services group, and the “look back” allows the stock to be purchased at the lowest point in a given purchase period.
“We do find the discount rate is one of the key drivers of participation,” Ms. Bloom said. She added the participation rate is typically about 15% to 20%, but increases in up markets and particularly in specific sectors such as technology.
Of companies that made changes to their stock plans, 71% said the changes were a result of the economic downturn. Changes included lowering or eliminating the discount rate, shortening the “look back” period or removing the look back altogether.
ESPPs were viewed as a core part of a benefit package by 50% of respondents; 28% of all respondents felt employees valued the plan more than other company benefits.
Some 72% of all respondents considered the plans as valuable as pensions and dental benefits, and more valuable than company-provided life insurance. “These plans can generate a lot of value for employees,” Ms. Bloom said.
Companies are enhancing the stock plans to increase and retain talent. Some 45% said improvements to the plan would motivate the workforce and improve morale, 41% said the enhanced plan would attract talent, and 33% said it will help retain talent. Respondents could give more than one answer.
Fidelity surveyed 422 plan executives.