The Employee Stock Purchase Plan (ESPP) is your opportunity to become a part owner of Gap Inc. at a special discounted rate through easy payroll deductions. Through the ESPP, you can purchase Gap Inc. stock at a 15% discount off the market value on the day of the purchase.
What is the ESPP?
The ESPP allows you to contribute from 1% -15% of your base pay for the purchase of Gap Inc. stock shares. You have the opportunity to enroll in the program every three months during special "enrollment periods," and your stock will be purchased once a quarter. After you enroll, the ESPP contribution amount you have chosen is taken out of each paycheck through payroll deductions on an after-tax basis. (Deductions will begin with your first paycheck after the enrollment deadline date.)
Your payroll deductions will accumulate in a non-interest-bearing account until the quarterly purchase date when your Gap Inc. stock shares will be purchased for you at a 15% discount off the current market value. Your shares will then be transferred into an individual account at E*TRADE Financial.
You can sell your Gap Inc. stock any time after it's transferred into your E*TRADE Financial account, unless you are subject to "window trading restrictions." Please email Gap Inc. Legal Department at Insider_trading_compliance@gap.com for more information on the "window trading" policy.
Who is eligible?
All U.S. and Puerto Rico employees are eligible to enroll in ESPP, with the exception of seasonal employees, and those who own (or have the right to acquire) 5% or more of the Company's voting stock.
If you are considered to be a minor in your state, you will need parental/guardian consent prior to making your first ESPP purchase. If this applies to you, a consent form will be mailed to you. For more information, visit www.etrade.com/stockplans or call 800-838-0908.
All non-U.S. citizens participating in ESPP will be required to complete an IRS Form W-8 BEN. If this applies to you, please visit www.etrade.com/stockplans to access the form or call 800-838-0908.
When can I take advantage of this benefit?
There are four opportunities each year to enroll or change your current elections in the ESPP. See the chart below for specific dates. You will be notified of upcoming enrollment opportunities through benefits communications.
|Enrollment Start Date||Enrollment End Date||Deduction Start Date||Deductions Used For|
|Feburary 7, 2014||Feburary 26, 2014||Pay Period ending February 22, 2014||May 2014 purchase|
|May 9, 2014||May 28, 2014||Pay Period ending May 31, 2014||August 2014 purchase|
|August 8, 2014||August 27, 2014||Pay period ending August 30, 2014||November 2014 purchase|
|November 7, 2014||November 26, 2014||Pay period ending November 29, 2014||February 2015 purchase|
How do I participate in the ESPP?
Effective August 2011, you will be able to enroll in the ESPP via E*Trade's web enrollment tool. In addition, all changes made to your current election will be made via the web enrollment tool. To enroll, please visit www.etrade.com/enroll during the enrollment dates and follow the instructions. Be prepared to provide Gap Inc.'s ticker symbol, "GPS", your seven-digit Gap Inc. employee ID number and your last name to enroll or change your current election percent. You can elect to contribute from 1%-15% of your gross base pay.
Once you enroll, you will not need to re-enroll unless you want to change or stop your election. Deductions will continue to be taken from your paycheck until you leave the company or stop your contributions. You may increase or decrease your election only during an enrollment period.
How do I stop my participation in the ESPP?
You can stop your deductions (i.e., reduce your payroll deduction percentage to zero) at any time. To stop your deductions, log onto www.etrade.com/enroll. Note that if you stop your participation regardless if you elect to suspend or withdrawal your current contributions if you wish to restart your deductions you must make a new enrollment election during a future enrollment period.
Suspending your deductions instead of withdrawing from ESPP allows you to remain in the Plan. Monies already deducted will be used to buy stock during the next purchase window.
You can choose to withdraw from the Plan completely at any time (except during the enrollment periods in February, May, August and November). Withdrawing is not considered the same as suspending your deductions. When you withdraw, all of the money you have accumulated for the current period will be refunded to you and no stock will be bought on your behalf for the next purchase. Once you withdraw, you are no longer eligible to participate in the Plan during the current period. You can re-enroll in the Plan during the next period.
Please note: Beginning August 5, 2011, the Stop Form is no longer valid and all stop requests must be made via the E*Trade web enrollment tool.
What will the ESPP cost me?
Your contributions will be deducted from each paycheck based on the election that you choose. All other costs are paid by the Company, and you will not be charged fees or commissions for the ESPP stock purchases.
It's important to understand that selling your stock will affect your taxes, and you are responsible for any income tax owed. The tax rules vary based on how long you own the stock before you sell. Please see "How do I Calculate ESPP Taxes?" for more information. You will also pay commissions to E*TRADE Financial when you sell your stock.
How do I sell shares? When can I sell my shares?
You'll need to activate your account prior to selling shares. To activate your account, visit www.etrade.com/stockplans or call E*TRADE at 800-838-0908. Once your account is active you can sell shares either online or by calling the Internet/IVR Sales at 800-838-0908. You will pay commissions for stock sales.
If you are not subject to "window trading" restrictions, you can sell your stock any time after your shares are deposited in your E*TRADE Financial ESPP account. However, please note that while you are in the possession of "inside" information (that is, information that would be important to an investor, but that has not yet been made public), you are prohibited by federal securities laws and Company policy from trading Company stock until the information has become public.
How much do I pay in commission when I sell my stock?
The rates are:
|Internet/IVR Sales|| www.etrade.com/stockplans or by
$16.99 commission for internet or IVR trades
|Live Broker Sales||
$19.95 minimum commission
$35.00 overriding commission for live broker trades
$0.10 per share for 1-1,000 shares
$0.05 per share for 1,001-5,000 shares
Can I move my ESPP shares to another account or brokerage firm?
Gap Inc. requires that your shares remain in your E*TRADE Financial ESPP account for a minimum period to track sales and allow the required tax reporting to be completed. You may transfer your shares to another account, brokerage firm, or receive physical stock certificates after holding the shares for 24 months following the first day of the purchase period in which the stock was purchased.
What happens to dividends under the ESPP program?
Any dividends that you receive will be paid in cash and deposited into the retail portion of your E*trade account. You can contact E*TRADE Financial at www.etrade.com/stockplans and elect to have those dividends automatically reinvested. Dividends are taxable income in the year that you receive them.
How do I Calculate ESPP Taxes?
The information you need to calculate your taxes will be on your account statements and purchase/sale confirmations you will receive. E*TRADE Financial will automatically provide you with a W-9 Form (Request for Taxpayer Identification Number and Certification). If you do not return the completed form to E*TRADE Financial prior to the sale of shares, they are required to withhold taxes from your proceeds.
Selling stock before the 24-month holding period has ended
If you do not hold the stock long enough to satisfy the 24-month holding period, your federal income taxes are calculated this way:
Selling stock after the 24-month holding period has ended
If you hold the stock until at least 24 months after the first day of the purchase period in which you bought the stock, your federal income taxes are calculated this way:
Examples of taxable income calculations
Assume the key figures were:
|Stock's market value at start of purchase period:||$20.00|
|Stock's market value at end of purchase period:||$22.00|
|Actual price paid at end of purchase period::||$18.70|
|Sale price of stock::||$25.00|
NOTE: The stock prices are examples and for illustrations only. No one knows what the stock price will be in the future.
If you sold before the 24-month holding period had ended, you would figure your taxable income this way:
Calculate your ordinary income: $22.00 - $18.70 = $3.30 (It is the stock's market value on the purchase date minus the actual price paid).
Calculate your capital gain: $25.00 - $22.00 = $3.00 (It is the sale price minus the stock's market value on the purchase date).
You would owe taxes on $3.30 of ordinary income and $3.00 of capital gain. You can subtract any commissions you paid to sell your stock from your taxable gains.
If you sold after the 24-month holding period had ended, you would figure your taxable income this way:
Calculate your ordinary income: $20.00 x 15% = $3.00 (It is the value of the 15% discount at the start of the purchase period or the sale price minus the actual price paid, if less).
Calculate your capital gain: $25.00 - $18.70 - $3.00 = $3.30 (It is the sale price minus the amount paid minus ordinary income).
You would owe taxes on $3.00 of ordinary income and on $3.30 of capital gain. You can subtract any commissions you paid to sell your stock from your taxable gains.
How do I access my ESPP account?
You can access your ESPP account to view your account balance either online at www.etrade.com/stockplans or by calling 800-838-0908. You will need to activate your online account prior to selling shares.
How will I know that deductions have started?
Check your paycheck online for deductions. The deduction will be listed in the deductions column online soon after your eligibility date. You will also receive a quarterly statement from E*TRADE Financial that details your account. You can also view your account at www.etrade.com/stockplans.
What happens to my ESPP if I leave Gap Inc.?
If you leave Gap Inc., your ESPP cash balance that has not yet been used to purchase stock will be refunded to you. You will receive your refund approximately 4-6 weeks following the end of the month in which your termination was entered in the payroll database. The shares that have already been purchased for you will remain in your E*TRADE Financial account. Those shares are yours to keep or sell. You are not required to sell the shares within a specific time period after leaving the Company.
Where can I get more information?
Here are three ways you can get more information about the ESPP: