PeopleSoft Enterprise Stock Administration 9.1 PeopleBook

Administering Stock Option Dispositions

This chapter provides an overview of stock option dispositions and discusses how to track option dispositions.

Understanding Stock Option Dispositions

This section lists prerequisites and common elements and discusses:

Stock option dispositions.
Disposition processing.
Disposition reports.

Prerequisites

Before you begin recording stock option dispositions:

Process optionee exercises and releases.
Receive information about dispositions from optionees, transfer agents, or brokers.

Common Elements Used in This Chapter

EmplID	Click the EmplID number to access the Employee Information page, where you can view employee information.
Shares Self Service	Displays the number of shares that are reported as disposed through the self-service page and that have a status of self-service.
Shares Disposed	Displays the number of disposed shares that have a status of confirmed.
Shares Available	Displays the number of shares available. This equals (Shares Issued) − (Share Pending) − (Shares Self Service) − (Shares Disposed).
Disposition Number	Displays NEW when you enter a disposition. When you save, the system generates a sequential disposition number from the last disposition number stored in the Stock table.
Status	The default for a new record is Pending, unless the shares were already sold through a same day sale or a sell to cover transaction. Then, the status is Confirmed. When the status is changed to Confirmed, ordinary income can be sent to Payroll for North America by a transaction record or displayed on a manual payroll report when saved. If you must change a transaction that's been sent to payroll, set the status to Void. If an optionee reports a disposition through the self-service page, the status is Self Srvc (self service) until you set it to Confirmed, either by running the Confirm Self Service process or changing the status to Confirmed online.
Status Date	Displays the date on which the status was last changed and saved.
Sent to Payroll Date	Displays the date on which the transaction was sent to payroll or the day on which the manual report was run.
Sent to Payroll Source	Displays the way in which the income and taxes were sent to a payroll, either through Payroll for North America or a manual report.
Paycheck Number	Displays the paycheck number when the transaction was processed through Payroll for North America. This field is blank if a manual report was used.

Stock Option Dispositions

After shares are exercised or released, optionees can sell or transfer shares. Depending upon the option type and the holding period requirements, your company might be entitled to a tax deduction equal to the optionee's ordinary income on a disposition.

You can record and track dispositions, determine if they are disqualified, and, if you use Payroll for North America, send the ordinary income calculated on disqualifying dispositions directly to payroll for processing.

When you enter a disposition for an ISO or an ISO/SAR, the system checks the 422 plan rules defined on the Governing Body Rules - Stock Option Rules page to determine if the required holding period is met for preferential tax treatment. If the disposition does not meet the holding period requirements, the system calculates the ordinary income for the shares disposed. If the ordinary income is reported on a Form W-2, a company can take it as a tax deduction. If the disposition date meets the holding period requirements, the system does not calculate ordinary income.

Ordinary income calculated on a disqualifying disposition is based on the income method rule that is specified on the Stock Option Plan Rules - Payment/Income Methods page for ISO sales. This rule determines the price that is used to calculate the ordinary income on the disposition. The value also depends on whether the transaction is an exercise or a release, and if the optionee filed an 83b election.

Disqualifying dispositions are calculated for ISOs and ISO/SARs in these ways:

Exercise of Vested Shares

Holding Period: Calculated from the exercise date.

Ordinary Income Calculation:

[(Sale Price or Exercise FMV or lesser of the two) × Shares Disposed)] − (Grant Price × Shares Disposed)

Release with No 83b Election Filed

Holding Period: Calculated from the exercise date.

Ordinary Income Calculation:

[(Sale Price or Release FMV or lesser of the two)] × Shares Disposed) − (Grant Price × Shares Disposed)

Release with 83b Election Filed

Holding Period: Calculated from the exercise date.

Ordinary Income Calculation:

[(Sale Price or Exercise FMV or lesser of the two) × Shares Disposed)] − (Grant Price × Shares Disposed)

Disposition Processing

You might want to survey the transfer agents, brokerages, and the optionees to determine if a transaction represents a true disposition or a transfer from one brokerage account to another. You can enter all information received from transfer agents or brokers concerning potential dispositions into the system with a pending status.

When the individual, transfer agent, or broker confirms a disposition, change the status to confirmed. If the disposition is disqualified, you can send the ordinary income to payroll to include it on the individual's W-2.

If you use Payroll for North America, you can automatically send the income information to payroll for processing. If you do not use Payroll for North America, or the optionee is not paid through this payroll system, run the Disqualifying Disposition Payroll report and send it to your payroll administrator for processing. Stock Administration displays the date on which you transmitted the data or ran the report.

Disposition Adjustments and Cancellations

If you must adjust or cancel a disposition after you've sent the ordinary income to payroll, change the status of the transaction to void and add a new disposition to the record. If the disposition was created by a same day sale or sell to cover transaction, make the change using the Exercises or Releases components, as appropriate. If you use Payroll for North America and the transaction has not been processed by Payroll for North America, the system deletes the transaction from the table. You receive a message that the transaction was successfully deleted. If Payroll for North America processed the transaction or you ran the manual payroll report, run the Disqualifying Disposition Reversal report and give it to your payroll administrator.

Tracking Option Dispositions

This section discusses how to:

View an optionee's exercises and releases.
Enter an exercise disposition.
Enter a release disposition.

Pages Used to Track Option Dispositions

Page Name	Definition Name	Navigation	Usage
Maintain Dispositions	ST_OPTN_DISPOSN	Stock, Grant Transactions, Maintain Dispositions	View a summary of an optionee's exercises and releases. From this page, you can access the Exercise Disposition and Release Disposition pages, where you enter dispositions.
Exercise Disposition	ST_EXER_DISPOSN	Click an exercise number on the Maintain Dispositions page.	Enter an exercise disposition.
Exercise Disposition Payroll Data	ST_EXER_PR_SBP	Click Sent to Payroll Date on the Exercise Disposition page.	View payroll details.
Release Disposition	ST_REL_DISPOSN	Click a release number on the Maintain Dispositions page.	Enter a release disposition.
Release Disposition Payroll Data	ST_REL_PR_SBP	Click Sent to Payroll Date on the Release Disposition page.	View payroll details.

Viewing an Optionee's Exercises and Releases

Access the Maintain Dispositions page (Stock, Grant Transactions, Maintain Dispositions).

Exercise Number

Click to access the Exercise Disposition page, where you can view exercise details and enter a disposition for the exercise.

Shares Disposable

Displays the number of shares that are available for disposal as of the current system date.

Release Number

Click to access the Release Disposition page, where you can view release details and enter a disposition for the release.

Entering an Exercise Disposition

Access the Exercise Disposition page (click an exercise number on the Maintain Dispositions page).

Disposition Information

Disposition Date	Enter the sale or transfer date. The date must be greater than or equal to the exercise date. The system displays the current date as the default value. If the optionee is an insider and the date is during a blackout period, the system displays a warning.
Disqualifying Disposition	Selected if the option type is ISO or ISO/SAR, the option was exercised in shares, and the sale date does not meet the holding period requirements in the governing body rules for IRS 422 plans.
Ordinary Income	If the transaction is a disqualifying disposition and the Disqualifying Disposition check box is selected, the system calculates and displays the ordinary income.
Shares Disposed	Enter the number of shares that were disposed.
Sale at Exercise	Selected if the shares were sold at exercise, such as in a same day sale or sell to cover transaction. Modify these dispositions using the Exercises component.
Disposition Price	Enter the disposition price. The exercise FMV defined on the Exercises - General page is the default.
Total Price	Displays the grant price multiplied by the number of shares sold.
Disposition Type	Select Sale (default) or Transfer.
Disposition Source	Select how the disposition was reported. Values are: Administrator, Self Service, and Third Party. Administrator is the default.
Receipt Date	Displays the date on which the disposition receipt was run.
Update Payroll	Click to send the ordinary income to Payroll for North America.
Sent to Payroll Date	Displays the date on which the transaction was sent to Payroll for North America or the manual payroll report was run for disqualifying dispositions with ordinary income. Click the date to access the Exercise Disposition Payroll Data page, where you can view payroll details.
Reversal Date	Displays the date on which the manual Reverse Disqualifying Disposition report was run.

Entering a Release Disposition

Access the Release Disposition page (click a release number on the Maintain Dispositions page).

Grant Information

The system displays stock information related to the release that you selected.

83b Election

If the optionee filed an 83b election at the time of exercise, the system selects this check box.

Employee Information

The system displays employee information as of the disposition date.

Disposition Information

Disposition Date	Enter the sale or transfer date. The date must be greater than or equal to the release date. The system displays the current date as the default value. If the optionee is an insider and the date is during a blackout period, the system displays a warning.
Disqualifying Disposition	Selected if the option type is ISO or ISO/SAR, the option was exercised in shares, and the sale date does not meet the holding period requirements in the governing body rules for IRS 422 plans.
Sale at Release	Selected if the shares were sold at release, such as in a same day sale or sell to cover transaction. Modify these dispositions using the Releases component.
Ordinary Income	If the transaction is a disqualifying disposition and the Disqualifying Disposition check box is selected, the system calculates and displays the ordinary income.
Disposition Price	Enter the disposition price. The exercise FMV, which you can change, is the default.
Disposition Type	Select Sale or Transfer. Sale is the default.
Receipt Date	Displays the date on which the disposition receipt was run.
Disposition Source	Select how the disposition was reported. Values are: Administrator, Self Service, and Third Party. Administrator is the default.
Update Payroll	Click to send the transaction to payroll.
Sent to Payroll Date	Displays the date on which the transaction was sent to Payroll for North America or the manual payroll report was run for disqualifying dispositions with ordinary income. Click the date to access the Release Disposition Payroll Data page, where you can view payroll details.
Reversal Date	Displays the date on which the manual Reverse Disqualifying Disposition report was run.

Exercise Number	Click to access the Exercise Disposition page, where you can view exercise details and enter a disposition for the exercise.
Shares Disposable	Displays the number of shares that are available for disposal as of the current system date.
Release Number	Click to access the Release Disposition page, where you can view release details and enter a disposition for the release.