Participants

Majority Use ESPPs for Debt and Retirement

Fidelity research also shows that employees in an ESPP are three times more likely to sell ESPP shares for emergency cash rather than take a loan from their 401(k).

By Rebecca Moore editors@plansponsor.com | December 12, 2016

More than one-third (34%) of employee stock purchase plan (ESPP) participants paid bills and addressed debt with the proceeds of company stock acquired through their ESPP, a study from Fidelity Investments finds.

Nearly one-fifth (19%) of employees reinvested the proceeds from an ESPP sale—10% used the money to invest in stocks or mutual funds, and another 9% reinvested the proceeds in a retirement savings account.

ESPPs can also help employees protect their retirement savings by reducing the likelihood they will borrow against their 401(k). Fidelity research shows that employees in an ESPP are three times more likely to sell ESPP shares for emergency cash rather than take a loan from their 401(k), and more than half (52%) added that it was “highly unlikely” they would tap their 401(k) if they needed cash.

“Employee stock purchase plans can help workers with their immediate needs and have a positive impact on their overall financial wellness,” says Emily Cervino, vice president, Stock Plan Services at Fidelity Investments.

Nearly one in five (17%) employees are utilizing ESPP proceeds for home needs, with 10% using the money for home improvements and another 7% using ESPP funds for the purchase of a new or second home. Eleven percent put the money in an emergency fund.

The research also showed workers may be overlooking one use for the proceeds from an ESPP—only 5% of employees used the money for college expenses or student loans.

“ESPPs are sometimes overlooked as a workplace benefit. In most cases, as many as two-thirds of eligible employees do not participate in their ESPP. These plans are easy to use and can help workers address a variety of planned, and unplanned, expenses,” adds Cervino.

SPONSORED MESSAGES