Year-end processes can feel like a frantic dash to the finish line under the best of circumstances. In this especially challenging year, many stock plan administrators could feel extra pressure as they struggle to manage responsibilities in finance, legal, HR, payroll and more.
As you juggle competing priorities and deadlines, you may feel like you don’t even have time to save time. But a quick, high-level review of your approach can make all the difference.
Making a list, checking it twice
Start by setting up a meeting on the calendar so you, your internal business partners, and your service providers can all get on the same page. Consider doing this sooner than later — for example, late summer is probably a good time to start, and it’s not too early to chart this into your timetable for next year.
Get specific about when and how to close out administrative checkpoints for the end of the year, and delegate responsibilities accordingly. For example, what are the deadlines for payroll? What strategies do you want around
Next, put together a checklist to keep track of your progress. This should be a “living” document you can update over time. For each task, identify an owner and discuss your expectations, deadlines and any special procedures. For example, your list might include:
- Verifying tax rates and limits, terminations, employees out on disability, or insider trading and watch lists
- Preparing for 3921 and 3922 reporting and communications
- Identifying current W-8BEN certification status of account holders
- Late-year exercises and selling reminders
- Pre-balance of taxes due and paid
As you build your list, start by focusing on your internal processes, but don’t forget to ask your provider for any resources they may have. There are also plenty of industry resources — such as NASPP, GEO, and other trade groups — that can help you identify important year-end considerations.
Don’t wait, automate
Next, take a look at your checklist to see what
While auditors love fewer hands on data — and automating information flow between systems can help reduce risk — implementation can be extremely involved. Talk to your service provider about what you need to accomplish and find out what steps might be needed on their end to sync systems — or if there might be out-of-the-box solutions available. You’ll never know if you don’t ask. Then, talk to your internal partners to kickstart any work, such as building reports, that needs to be done to clear the way. Again, this will likely not be a quick process that wraps up by the end of the year, but the planning and hard work that starts now can pay off in the long run.
When everything is in place with your provider and internal teams, it’s time to run tests to make sure the new processes work. Once you’ve ironed out any kinks and added the final touches, all you have to do is flip the switch — saving time, reducing risk, and making room to concentrate on other responsibilities.
Around the world
Year-end also means it’s time for tax recertification. All account holders must certify their tax status: While this may happen automatically for US citizens and resident aliens, depending on your provider, any non-US persons must (re)certify every three years by completing their W-8BEN tax certification — even if nothing has changed.
If non-US participants don’t recertify, they may face 24% backup withholding on all gross proceeds and foreign income, and 30% non-resident alien withholding on US dividend distributions. This continues until certification or recertification is complete, but participants must work directly with the IRS to reclaim any remitted funds. This, of course, doesn’t make plan participants incredibly happy—but more importantly, it can also have an impact on stock-plan administration.
For example, if a non-US participant has a cashless options exercise or a sell-to-cover on restricted stock-vesting events, backup withholding would affect the amount of money available from the transaction to pay the taxes. Your provider may offer solutions for many processes related to tax certification, but it’s important to stay ahead of the curve and tuned in to your participant population. Automation and an effective communication strategy can go a long way to help ease the burden.
Tying up loose ends
This should give you a good idea of where to start, but don’t overlook other tasks that may fall under the year-end processes umbrella:
- If you have tax-qualified plans in the US, disposition tracking will also be required — which affects W-2 income. There are different ways this can be tracked, but the bottom line is to make sure you’re able to easily update payroll and fulfill reporting US requirements.
- Make sure you can confirm the drop-dead date for payroll at the end of the year, and check with your provider to make sure dispositions are loaded correctly in your system.
- Review and update your tax table for any changes to global rates, breakpoints, or tiered rates. This is another area where your provider may be able to offer additional support to ensure the data is in the system the way you need it to be.
Think of year-end as a chance to reflect, assess what went well this year — and what you want to improve going forward. It’s an opportunity to solicit outside perspectives, build in flexibility, automate, and communicate — both above and below.
No matter how many hats you wear, you don’t have to go it alone: Use your resources, your team, and your network. It can help you lead this process effectively within your organization, while also uncovering ways to make your job easier and improve the participant experience.
