Stock Plans Stump Many Workers

January 29, 2003 ( - Many workers at companies offering stock plans likely aren't taking full advantage of them because many are clueless about how they work.

That was the result of a Fidelity Investments study in which a quarter to a third of respondents didn’t know much about employee stock option plans (SOP) and stock purchase plans (SPP). The study found workers didn’t know how to exercise share grants, whether and when to buy company stock, and the tax implications of stock investing. Some 31% were unable to figure out how much their stock options were worth and a third didn’t know the company’s current share price.

Fidelity said the study pointed out the need for investor education with more than 8% of US households with a full-time employed adult have access to an employee stock option plan while 10% have a stock purchase plan.

One-third (33%) of SOP participants see their options as a company benefit; however, almost half consider it either a perk (28%) or incentive (21%) unrelated to compensation and benefits. The bulk of those participating in employee stock purchase plans feel similarly, with almost half viewing their plan as a benefit (49%), while 26% see it as a convenient way to invest, and 15% as a perk.

Many Let Options Expire

Close to one million US households let options expire during the last three years, and as many declined to accept the initial share grant.   More than half of respondents (53%) said it was because they did not understand how to exercise or found the plan too complicated.

Of those who exercised their options during the same time frame, only 39% did so because it was a good investment with the share price having gone up.   Many needed the cash (22%) or their options were about to expire (21%).   In addition, 39% of respondents still holding unexercised options say they have a strategy about when they will exercise.  

Similar patterns hold true for stock purchase plan participants. Of those choosing not to participate regularly, 14% say it is because they do not understand their stock purchase plan.   Regarding those who have never participated, participants say they don’t understand the plan (10%), they don’t know how to make a purchase (5%) and don’t understand the tax implications (13%).