CEP Employee Stock Purchase Plans (ESPPs)

Question 1

What is the maximum discount from fair market value that a Section 423 ESPP may offer to participants?

Accepted Answer

15%

Answer

5%

Answer

10%

Answer

25%

Question 2

Under Section 423, what is the annual dollar limitation on the fair market value of stock an employee may purchase through an ESPP?

Accepted Answer

$25,000

Answer

$10,000

Answer

$15,000

Answer

$50,000

Question 3

What is the maximum length of an offering period permitted under a Section 423 ESPP?

Accepted Answer

27 months

Answer

12 months

Answer

24 months

Answer

36 months

Question 4

Which of the following employee groups may a Section 423 ESPP plan document NOT exclude from participation?

Accepted Answer

Employees who own 5% or more of company stock

Answer

Employees with less than two years of service

Answer

Part-time employees working fewer than 20 hours per week

Answer

Highly compensated employees as defined under IRC Section 414(q)

Question 5

What is a 'look-back' provision in the context of an ESPP?

Accepted Answer

A feature that sets the purchase price as the lower of the FMV at the offering date or purchase date

Answer

A provision allowing employees to review prior payroll deductions before enrollment

Answer

A rule requiring a 6-month review of plan participation rates

Answer

A mechanism to adjust the discount based on stock price performance

Question 6

Under a Section 423 ESPP, the same rights and privileges must be granted to:

Accepted Answer

All participating employees equally

Answer

Only full-time employees

Answer

All employees who have been with the company for at least one year

Answer

Only employees below a specified compensation threshold

Question 7

Which of the following is a valid basis for setting the purchase price under a Section 423 ESPP?

Accepted Answer

85% of the lower of FMV on the offering date or the purchase date

Answer

85% of the FMV on the purchase date only

Answer

85% of the FMV on the offering date only

Answer

The average daily closing price over the offering period