SkyWest Employee Stock Purchase Program and 401K

[crj567]

O.K.-

I see what you are doing, now Andy... One of us has a serious mis-understanding of the system, and I am not sure who it is. Maybe I am wrong.

The way I read the ESPP program stuff, it looks like the 5% discount only takes place once-at the end of each six-month period.

Your calculations show a 5% discount on each purchase, throughout the period. From what I understand, the program looks only at the closing price on the last day of the period, and knocks 5% off-that is all.

If this were progressive, and each time a purchase was made, it was made at a 5% discount, you would be correct, but I don't get that from the stuff I have read. Looks like it only takes place once, but sits in an account until that time.

-The ESPP does specifically reference that the price of the stock is taken into account only once, and that the price is a snapshot on the last day of the period.

 

[CFIT]

I just got my info packet for the Deffered Compensation Program, has anybody taken a look at it yet, is it any good?

 

[Gnarloooo]

That's about to go to 35% tax if our new commie-who-be-in-charge has anything to do with it.

idiot

 

[crj567]

idiot

I agree-only a true Damn Fool Idiot would raise taxes in this economy....


Unfortunately, that seems to be the corner we just painted ourselves into.

-Welcome to the "new progressive era."

 

[USCtrojan]

I agree-only a true Damn Fool Idiot would raise taxes in this economy....


Unfortunately, that seems to be the corner we just painted ourselves into.

-Welcome to the "new progressive era."

Short term capital gains (less than a year) is already taxed right now at 35%. If you hold longer than 1 year then it's 15%. Maybe this is what you were referring to? Obama wants to take it to 37%.

Trojan

 

[PBRstreetgang]

Fair enough. What is your plan to do with $100 every two weeks if you don't do this?

Beer and teenage hookers! You?
PBR

 

[PBRstreetgang]

Fair enough. What is your plan to do with $100 every two weeks if you don't do this?

Beer and teenage hookers! in Thailand. You?
PBR

 

[Andy Neill]

O.K.-

I see what you are doing, now Andy... One of us has a serious mis-understanding of the system, and I am not sure who it is. Maybe I am wrong.

The way I read the ESPP program stuff, it looks like the 5% discount only takes place once-at the end of each six-month period.

Your calculations show a 5% discount on each purchase, throughout the period. From what I understand, the program looks only at the closing price on the last day of the period, and knocks 5% off-that is all.

If this were progressive, and each time a purchase was made, it was made at a 5% discount, you would be correct, but I don't get that from the stuff I have read. Looks like it only takes place once, but sits in an account until that time.

-The ESPP does specifically reference that the price of the stock is taken into account only once, and that the price is a snapshot on the last day of the period.

No, you still don't get it. I am not saying there is a 5% knock off on each purchase throughout the period. My calculation showed what a savings account would have to do in order to accrue $68.42 in interest in six months - that's all.

Let's see what you can agree on. I'll list some points and you can say I agree with 1, 3, & 4 for instance.

1. If you put in $100 per pay period, the total deposits would be $1300 after 13 pay period (6 months).

2. In order to accrue $68.42 in interest in a savings account, that savings account would have to be paying 18.983% interest compounded bi-weekly (slightly less if compounded daily).

3. The average amount in the account during the six month period is $650.

4. $68.42 is 10.53% of $650.

5. 10.53% is the return on the average amount in the account in 6 months.

6. A 10.53% return achieved in 6 months is the equivalent of roughly 21.06% on an annual basis.

Are you maintaining that participating in this program has an annual rate of return of 5%?

 

[SKYWRJGUY]

I flipped through the DCP stuff...I couldn't figure out if I can put XX% into the 401k and XX% into the DCP. For instance, should be able to put 10,500 or so into 401k if past two years are any indication, so would like to put the other 5k into DCP. However, some things I didn't like: 1) pay FICA on contributions; 2) contributions count as assets to company and they can use them to pay creditors [if push comes to show]; 3) mutual funds seemed to sorta suck; 4) only change once per year.

Wonder if I can defer enough into the DCP to take me below the HCE threshold...could fully fund 401k plus something into DCP. Need to ask my brother, methinks...

 

[JustaNumber]

Andy, I believe your math is correct, but the biggest problem with the program is that they hold your shares for about three days, during which their value may very likely lose 5% or more. At least with 15% it was more difficult to drop that much, especially if you got to use the beginning of the 6 month period for the purchase price.

 

[Andy Neill]

Andy, I believe your math is correct, but the biggest problem with the program is that they hold your shares for about three days, during which their value may very likely lose 5% or more. At least with 15% it was more difficult to drop that much, especially if you got to use the beginning of the 6 month period for the purchase price.

That's a reasonable concern. It would be interesting to see how long it has taken to recover to at least the purchase price if it moved down. As with any day on the market, sometimes it goes up, sometimes down, and sometimes sideways. I'm betting that even at 5%, the average would be a strong winner.

But I've got mine. Not a factor anymore. I just wanted to give some food for thought for those weighing the decision.

 

[crj567]

Andy-

I do see what you are getting at, but it is not a fair comparison......

In a savings account, you build money incrementally as well, and the interest builds incrementally. In this type of account, you are dealing with a lump sum which is used for the purchase at the end-all at one moment. The $650 average balance is completely irrelevant and should be ignored-it simply clouds the waters. -Although that is what your calculation is based on.

The fact is that your money accrues up until the point it is used... At that point you get a 5% discount-and as was mentioned earlier, the stock could drop and you could lose all your "interest." Too much risk for my 5%.

Essentially we are talking "apples/oranges" here.... We are both correct, but we have very different
perspectives. I just think it is very misleading to put it in those terms.

APR vs APY is the way people get jacked into never being able to pay off credit cards. Technically-I see what you are saying now, but it is very misleading to those who don't understand that the 21.06% APY means a very small actual return in real dollars.

 

[WalterSobchak]

Beer and teenage hookers! You?
PBR

Sounds like a pretty excellent plan to me.

 

[PBRstreetgang]

Sounds like a pretty excellent plan to me.

I thought so, and continue to!

 

[Nevets]

For instance, should be able to put 10,500 or so into 401k if past two years are any indication, so would like to put the other 5k into DCP.

I must be missing something because I was able to contribute $15,500 to my 401k this year.