the globe to find your espp’s perfect...international adventures – navigating the globe to find...

International Adventures – Navigating

the Globe to find your ESPP’s Perfect

Path

Charles Russo, Computershare

Sean Ahern, Prudential

Jack McArthur, Aon

-2-

Introduction

Global Plans

– Overview

– Plan Design

– Plan Administration

– Tax & Legal

New Global Plans

– Overview

– Design

– Case Study

Agenda

-3-

Broad based in nature

Enhanced “benefits” package (rather than “compensation”)

Global appeal

Appreciation of value – with right combination of discount, look-back, and offering

Employee motivation, loyalty, engagement

High participant satisfaction

Opportunity for employee ownership outside of constraints of 401(k)

Non-Excessive

Expense efficient

Minimal share usage (no ISS concerns)

Corporate tax deduction

Why ESPP?

-4-

Prudential Financial, Inc.

For nearly 140 years, Prudential Financial, Inc., has helped individual and institutional customers grow and protect their wealth. Today, we are one of the world's largest financial services institutions with operations in the United States, Asia, Europe, and Latin America. We also have one of the most recognized and trusted brand symbols: The Rock ®, an icon of strength, stability, expertise, and innovation.

We strive to create long-term value for our stakeholders through strong business fundamentals, consistent with our mission guided by our vision and directed by our company's core values. We are committed to keeping our promises and to doing business the right way.

-5-

U.S. – IRS 423 Plan Offered

Outside the U.S. – 423 Mirror Plan offered to allow more administrative flexibility

ESPP offered to employees in:

– United States

– Argentina

– Brazil (including Independent Contractors)

– Mexico

– Japan

– Korea (including Independent Contractors)

– Taiwan

– UK SAYE: as a replacement for an ESPP

Prudential Financial, Inc.

-6-

423B Tax-Qualified plans showed higher average yearly contributions and higher participation rates

Plan Type

16%

17%

18%

19%

20%

Non-Qualified 423B Qualified

Average Participation Rate vs. Plan Type

-7-

Approximately 25% participation for companies that offer a plan with a Look-Back feature

Look-Back

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

No Look-Back Look-Back

Average Participation Rate

-8-

Plan design features

Look-Back

No Look-Back

Look-Back

Discounts

0% - Employer Match

0% - No Match

5%

10%

15%

Other

Plan Type

Non-qualified

423B Qualified

Length of Purchase Period

Annual

Monthly

Quarterly

Semi Annual

Other

-9-

Discount

Larger discounts lead to higher contribution rates and participation rates

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

0% w/o Employer Match 0% w/ Employer Match 5% 10% 15%

Ave

rag

e P

arti

cip

atio

n R

ate

Discount

Participation Rates vs. Discount

-10-

Length of Purchase Period Longer purchase periods lead to higher contributions and participation up to a point (semi-annual),

after which longer periods lead to lower contributions and participation

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

Monthly Quarterly Semi Annual Annual

Ave

rag

e P

arti

cip

atio

n R

ates

Average Participation Rate vs. Purchase Period

-11-

Length of Purchase Period

The presence of a look-back feature is a key determinant of whether increasing purchase period length increases or decreases participation

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

Monthly Quarterly Semi Annual Annual

Average Participation Rate w/ Look-Back

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

Monthly Quarterly Semi Annual Annual

Average Participation Rate (No Look-Back)

-12-

Factors to Consider when Issuing an International Plan

Administration

– Tax and Legal Considerations

Provide reporting to assist with local taxation regulations (e.g. purchase detail report)

Exchange control – Ensure administrator can assist with regulatory hurdles in certain countries (China SAFE)

– Communication and Marketing

Leverage existing communication channels within an organization

Translate everything in terms that are easy to understand

Explore creative ways to promote your plan (videos, stand-alone websites)

Educate local HR representatives

-13-

Cost is a factor and must be managed:

– Accounting charge

– Administration

External stock plan vendor

Tax & Legal Due Diligence

Communication/marketing of ESPP

– Perform periodic cost benefit analysis for CFO

Factors to Consider when Issuing an International Plan

-14-

Prior experience is key

Multi-Lingual website

Ability to support a wide range of foreign currencies

Global payroll and funds management

Factors to Consider when Choosing a Stock Plan Provider

-15-

Administration of International ESPP:

– Eligibility to participate: Countries should have at least 100 employees and have no significant/costly legal barriers (i.e. China SAFE, EU PD, Securities licensing requirements, foreign exchange restrictions) to be offered the ESPP

– Administration and offerings are managed locally, with support from Prudential HQ and external plan administrator

Local adjustments to administration are made to accommodate local work rules and payroll administration

– Communication/Education materials are created in the U.S. and translated, but the distribution and communication plans are administered at the local level

Market plan and also be clear on Plan rules

– Administrator’s web-sites are translated

– HR data capabilities

Prudential Financial - Administration/Local Considerations

-16-

– Payroll – income reporting and tax withholding

– Computershare Maintenance: W8-BEN Forms

Wire maintenance

Account maintenance

Prudential Financial - Administration/Local Considerations

-17-

-18-

Tax & Legal Compliance – annual due diligence

– Securities filings – Japan & Korea

– Labor Laws

– Foreign exchange controls for international plans

– Tax – different that 423 taxation once ESPP is exported outside of the U.S.

– Corporate Tax Charge-back

Prudential Financial – Tax & Legal Considerations

-19-

With significant commitment (from parent and local subsidiary) to operating an efficient and effective ESPP, a “framework” can help assess the viability of rolling out ESPP in new jurisdictions

Assists various business partners in understanding country regulations and any other special requirements

Clearly communicates roles and responsibilities with regard to extending the ESPP to a new jurisdiction

Considers specifying targeted levels of participation

Removes ambiguity with respect to responsibilities and removes subjectivity with regard to the corporate guidelines relating to the appropriateness of ESPP in new jurisdictions

Holds senior level contacts at the subsidiary level accountable for process requirements

Navigating New Countries

-20-

Detailed business requirements and standard operating procedures are prepared with the country HR teams to ensure standard processing is performed timely, accurately and under the rules of the Plan

Calendars are prepared for each plan event to ensure timely completion by all parties, including the country operations

Navigating New Countries

-21-

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

U.S. Territories West South Northeast Midwest International

Average Participation Rate by Region

Participation by Domicile

-22-

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

Europe North America Oceania Africa Asia South America

Average Participation Rate by Continent

Participation by Continent

-23-

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

Europe North America Oceania Africa Asia South America

Participation Rates vs. Look-back by Continent

Look-Back No Look-Back

Look-back by Continent

-24-

Discount by Continent

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

Europe North America Oceania Africa Asia South America

Participation Rates vs. Discount by Continent

0% w/o Employer Match 0% w/ Employer Match 5% 10% 15%

-25-

Purchase Period by Continent

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

Europe North America Oceania Africa Asia South America

Participation Rates vs. Purchase Period by Continent

Monthly Quarterly Semi Annual Annual

-26-

Client Need:

– Large global company with over 200 payroll files from 54 countries generated monthly

– Needed assistance for payroll and funds management

– Dividend and interest payments combined with employee deductions

– Refunds in local currency

– Enrollments / Purchase periods every 6 months

Case Study – Global Payroll & Funds Management

-27-

Solution:

– Creation of database to support ongoing demographic/payroll data

– File collection/data processing of demographic files

– File collection/data processing of contribution files

– Facilitate and reconcile contribution funds movement (monthly)

– Demographic file provided in client format for open enrollment

– Contribution file provided for semi-annual purchase

Case Study – Global Payroll & Funds Management

-28-

Contact Information

Sean Ahern

Director, International HR

Prudential

(973) 802-2619

sean.ahern@prudential.com

Jack McArthur, ASA

Director

Aon Equity Consulting Services

(201) 460-6890

jmcarthur@radford.com

Charlie Russo

Vice President, Plan Managers

Computershare

(201) 680-4134

charles.r.russo@computershare.com