Section 423 (IRC) Plans

The majority of stock purchase plans in the United States are qualified IRC 423 Plans. In general, the participants do not recognize ordinary income when they purchase stock, but they do at the time of sale. The following IRS Section 423 eligibility rules are supported in the Governing Body Rules Table:

• Only employees of the company are eligible to participate in Section 423 plans. This includes employees who are not administered by HR.

• Employees who are major shareholders (those who hold 5 percent or more of the company's stock) may not participate in the plan.

• The maximum purchase discount is no more than 15 percent.

• The maximum offering length is no more than 27 months.

• An employee may not purchase more than $25,000 of stock in any calendar year (based on the value at participation). PeopleSoft supports the two most common interpretations of the IRC 423 maximum purchase value limit: 1) a $25,000 limit applies to purchases within a calendar year, and 2) a $25,000 limit applies to the years that the offering is outstanding. You select one of these purchase limit rules when you define the stock purchase plan rules.