0. Year-end procedures
How your equity compensation services provider can help you
Andrew Pickering
Solutions architect
E*TRADE Financial Corporate Services, Inc.

1. Disclosures PLEASE READ THE IMPORTANT DISCLOSURES BELOW.
This presentation contains proprietary information and may not be reproduced or redistributed without E*TRADE Financial Corporate Services, Inc.’s written permission.
The information provided within is general in nature and is not intended to, nor does it, replace product documentation, manuals and other related materials.
The laws, regulations and rulings addressed by the products, services, and publications offered by E*TRADE Financial Corporate Services, Inc. are subject to various interpretations and frequent change. E*TRADE Financial Corporate Services, Inc. does not warrant these products, services, and publications against different interpretations or subsequent changes of laws, regulations and rulings.
iPhone and iPad are registered trademarks of Apple Inc.
The E*TRADE Financial family of companies provides financial services that include trading, investing, and managing employee stock plans.
Employee stock plan solutions are offered by E*TRADE Financial Corporate Services, Inc.
System response and account access times may vary due to a variety of factors, including trading volumes, market conditions, system performance and other factors.

2. Agenda Working together to help meet your needs
I have eight bosses right now
Planning meeting
What can you automate?
W-8BEN—Tax status (re)certification
Some additional things to think about
Beginning of the year procedure—Is it over yet?
Important tasks to start the year
Time to start 6039 reporting
Let’s recap the list
Tips aimed at getting ahead of the game
Q&A

3. Working together to help meet your needs

4. A few reasons this might happen1
Reason 1: No time to save time
A tedious and manual process make for an unfortunate “Catch 22.” You’re so bogged down with the current process, there is no time to invest into another. 2
Reason 2: Unexpected events/changes derail the train
New plans, major 11th hour surprises, key person risk, regulatory changes. 3
Reason 3: Maybe they just never thought it could be different
Manual process happen in almost any complex plan—who’s to know which can be resolved?

5. I have eight different bosses right now…

6. Okay… it’s actually only six. but you get the point
Your eight “bosses”
1. Participants
FAQs - s, plan documents
Elections
Insiders, compliance
2. Legal
Form filings
Ownership requirements
Pre-clearance
3. Accounting/finance
Reporting
Disclosures
Share counts
4. subsidiaries/parents
Address tracking (and syncing systems)
Foreign tax withholdings
Corporate tax tracking
5. Payroll
Tax withholdings
Syncing systems, wage limits, etc.
ESPP contributions
6. HR/Compensation
Compensation strategy
Proxy reporting
Participant engagement
Okay… it’s actually only six. but you get the point

7. Planning meeting
This should give both you and the provider enough time to come up with a game plan:
Create a checklist
Discuss timelines, expectations, special procedures, and deadlines
Audit list of users and their entitlements and make any necessary adjustments
What can you automate?
Start planning for disqualifying dispositions:
Run the surveys to confirm all the information is loaded correctly
Mail the surveys to the participants—can your vendor provide this service?

8. Create one based on internal procedures
Example of Checklist
Create one based on internal procedures
Ask your vendor
NASPP

9. End of the year– Few things to think about
Dec 1
Run report of options expiring in next year and distribute reminder memos if necessary
Dec 6
Distribute ESPP Disqualifying Disposition Surveys
Dec 15
Window Period Closes: Block all insider accounts if necessary
Coordinate Year End Close with Payroll & Verify Drop Dead Date for W-2 info to Finance
Dec 21
ESPP Disqualifying Disposition Surveys DUE: Input disposition data
Dec 31
Year End Close Begins: Reconcile Plan Summaries for current year with prior year
Run Data Check to identify any errors and correct and/or document if necessary
BACK UP stock plan database
Information taken from NASPP website. Please visit the site for further details

10. Equity Administration System
What can you automate?
Integration of systems built independently of each other has the potential to create challenges
Users
Administrators
Accounting/Finance
HR/Payroll
Third-party Advisors
Systems
Participant Portal
Accounting System
Payroll/HRIS
Corporate Intranet
Equity Administration System

11. Eight steps to automate data exchange between systems
Talk with your Service Providers about your intent, and ask them what steps are needed on their end
Step 2
Write business requirements (in house) for data exchange
Document which fields will be used
Document processes for validation/audit
Document process for identifying and implementing updates
Step 3
Work with internal IT or vendor resources to build files from HR/Payroll system(s)
Step 4
Create a test plan—include deliverables, key business stakeholders, and due dates

12. Eight steps to automate data exchange between systems
Test file imports in a “sandbox” environment
Step 6
Work through errors/issues (may require new files and multiple loads to get these files just right)
Step 7
Turn on import automation
Step 8
Success! Ongoing automated file transfer

13. W-8BEN—Tax status (re)certification
Generally, participants who are not U.S. persons (e.g., U.S. citizens or U.S. resident aliens) must certify their foreign status when opening an account with their broker. They must then (re)certify every three (3) years thereafter.
Participants who do not (re)certify may be subject to 28% back up withholding on all gross proceeds and foreign income, and 30% non-resident alien withholding on U.S. dividend distributions.
Withholding will continue until certification or re-certification is complete.
Once funds have been remitted to the IRS, the broker will not be able to assist them in getting their funds back. They will have to work directly with the IRS.

14. W-8BEN—Tax status (re)certification—Your provider can help!
Hard copy mailings
communications
Online translations of instructions is key
Do you know what kind of assistance your provider can provide?

15. Some additional things to think about
Reconciliation! Reconciliation! Reconciliation!
Reconcile ESPP Dispositions
Reconcile ISO Dispositions
Review/Update Tax Table
Confirm that both ESPP qualifying and disqualifying dispositions add up to the number of shares sold during the year
Reconcile to verify that all ISO dispositions are entered into the platform correctly for reporting
Review tax table
Review if there were changes in global rates
Update YTD tax and wage information
Review with third-party advisor
Update rates and limits
Make sure to account for outside broker transactions

16. Beginning of the year procedures—Is it over yet?
© 2015 E*TRADE Financial Corporation. All rights reserved.
This presentation contains confidential information and may not be disclosed without
E*TRADE Financial Corporation’s written permission.

17. Beginning of the year– Few things to think about
Jan 1
Verify w/ HR that all year end Employee and Consultant new hires & terminations are input into stock plan database
Revisit Leaves of Absence with HR and update if necessary
Verify & Change Tax Rates & Limits and Zero out YTD taxes paid
Add Evergreen Shares to ESPP & Equity Incentive Plan
Verify all plan reserves & capitalization table (shares O/S) & reconcile with Transfer Agent numbers
Jan 2
Distribute 4th Quarter Option Summary Reports
Provide Finance with ESPP Qualifying and Disqualifying Disposition reports and NQ report with income amounts for W-2s, 1099s and tax credit amount (Provide addresses for BOD members and consultants)
Jan 5
Distribute 6039 Statements of Taxable Income w/ Explanatory Memo
Jan 10-15
Prepare & File S-8 for Evergreen Shares. Send copy to Transfer Agent & Instruct re Share Reserves
Jan 12-16
Hold Option education meetings
Jan 15- Feb 1
Prepare & Distribute D&O questionnaires for Proxy & Forms 5
Jan 31
Due Date for W-2s and 6039 Statements of Taxable Income to participants
Feb 1
Verify EDGAR password expirations and change if necessary
Feb 11
Due Date for Return of completed D&O Questionnaires
Feb 11-18
Prepare 1st Draft of Proxy Statement Equity Related Sections
Feb 10-18
Hold ESPP Education Meetings
Feb 15
Forms 5 Due, if necessary
Provide Legal w/ Info re California Disclosure Statement due March 1st
Feb 28
ESPP Purchase and New Enrollment/Change Forms Due
Mar 1-15
Update all plan Prospectus documents
Information taken from NASPP website. Please visit the site for further details

18. Time to start 6039 reporting
Form 3921
Form 3922

19. Let’s recap the list Update participant HR data in provider database
Verify that address and tax rate information is current in your system
Mail Disposition Surveys
W-8BEN (re)certification
Update YTD tax and wage information
Reset participant tax data to zero, reset all YTD and supplemental tax data
Reconcile ESPP and ISO dispositions
Load all outside broker sales into your current vendor system
Update tax table rates and limits as necessary
6039 reporting

20. Tips aimed at getting ahead of the game
Build in flexibility before it’s necessary
Automate, and repeat
Solicit outside perspectives
Communicate

21. Flexibility Flexibility 1. Build in flexibility before it’s necessary
Adding more granularity is typically more difficult once processes have been built up.

22. Automate Automate Flexibility 2. Automate, and repeat
It is likely that at least some part of your job can be automated. What’s the best path forward for you?

23. Outside Perspective Automate Flexibility Outside Perspective
3. Solicit outside perspectives
The stock comp industry is fortunate enough to have many experts who can be hired to provide advice and guidance.

24. Communicate Communicate Automate Flexibility Outside Perspective
Both above and below. The more plugged in you are to your participants and cross-functionally, the better able you are to anticipate changes.

25. Q&A