Results of a new survey reflect how  improving economic conditions and a strengthening job market are prompting many  U.S. companies to enhance their employee stock purchase plans in an effort to improve  their benefits package. According to Fidelity Investments, more  than half of the companies surveyed (51%) indicated they intend to modify their  employee stock purchase plan at some point in the next two to three years, with  nearly one-third (31%) of employers either introducing or increasing the  employee discount on company stock – usually between 10 and 15% – or adding a  “look back” provision to help employees buy shares in their company at a lower  purchase price.

These intended changes are in sharp contrast to some of the downgrades many  plan sponsors made to their employee stock purchase plans over the past few years.  According to the study, 71% of the employers that made a change to their  employee stock plan indicated their changes were a result of the recent  economic downturn. Some of these changes included lowering or eliminating the  employee discount on stock (14%), shortening the “look back” period (6%) or  removing the look back provision altogether (5%).

“During the recent recession, some employers felt the need  to reduce or eliminate the discount in their employee stock purchase program –  just as many employers felt the need to reduce or eliminate their 401(k)  match,” said Kevin Barry, executive vice president, Stock Plan Services at  Fidelity Investments. “But as the economy continues to improve, companies are  reinstating their discount as they realize that an attractive employee stock  purchase plan can be a significant asset in attracting and retaining the most  talented employees – especially in competitive hiring markets like technology,  professional services and transportation.”

Employers View Stock Plans as a Top Company Benefit,  Retirement Savings Vehicle   The survey found that 50% of employers consider their employee stock purchase  plan part of the company’s benefits package, as opposed to a form of  compensation or other benefit. Nearly three-quarters (72%) of employers  consider the employee stock purchase plan to be as valuable as pensions and  dental benefits and more valuable than company-provided life insurance. And  more than a quarter (28%) felt their employees value the company’s plan more  than other company benefits.

When asked what results they hoped to see from changes to  their plan, 41% of employers surveyed responded they were strengthening their  plan to attract talent in an increasingly competitive hiring market. One-third  of employers (33%) indicated they hoped the enhanced plan would help retain  valued employees, and almost half (45%) felt improvements to the employee stock  purchase plan would motivate their workforce and improve morale.

In addition,  employers now realize that employee stock purchase plans can play a key role in  their employees’ overall savings efforts. A 2012 survey by Fidelity found  that the majority of company stock plan assets (57%) are being earmarked for  eventual investment or retirement savings after participants sell them, and  more than eight out of 10 employers felt their plan was an effective tool to  help their employees reach their financial goals. When asked what they think  are the most common ways in which employees use the proceeds from their stock  plan, 69% of employers said retirement savings, along with college savings (42%),  emergency savings (41%) and to reduce debt (33%).

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