As a part of their compensation package, the Global Employee Share Purchase Plan (GESPP) offers Shell employees a unique opportunity to partake in the company's success. This plan not only facilitates the purchase of Shell shares at a discounted price, thereby promoting long-term investment and ownership, but also aligns employee interests with those of shareholders. Given the potential for share price appreciation, along with the perks of dividends, participating in the GESPP can be a wise financial decision (subject to personal tax implications and market risk). Information in this paper is for U.S. participants only. Different rules, regulations and restrictions apply for non-U.S. employees.
WHAT EXACTLY IS THE SHELL GESPP?
The Shell Global Employee Share Purchase Plan (GESPP) is a program that allows eligible employees to purchase Shell shares at a reduced price. Participants can make monthly contributions from their net pay from January to November each year. These contributions are used to buy Shell shares at a 15% discount, offering employees a chance to share in the company's success.
HOW IT WORKS
The GESPP operates on a simple and flexible framework. Employees can choose to contribute up to a maximum amount set annually through payroll deductions. Contributions can be made monthly from January to November, with the option to adjust the amount each month according to personal financial situations. No contributions are allowed in December.
At the end of each plan year, the accumulated contributions are used to purchase shares at a 15% discount. The price of these shares is calculated based on the lower of the share price at the beginning of the plan year or at the end, with the applicable discount applied [1]. This method ensures that employees benefit from the lowest share price recorded in the plan year, maximizing their investment value.
For employees to participate in the GESPP, they must enroll by the 15th of October to make contributions for that year. If enrollment occurs after this date, contributions will commence in the following plan year. Once enrolled, participation in the GESPP automatically continues year after year, provided the employee remains with a participating employer and does not adjust their contribution to zero. It is important to note that certain conditions, such as changes in the plan's terms, might require participants to actively re-enroll to continue their involvement.
ELIGIBILITY AND JOINING THE PLAN
Who Can Participate
Eligibility for the Global Employee Share Purchase Plan (GESPP) is extended to employees of Shell group companies that are part of the plan. Potential participants should first verify their eligibility by consulting the Country Fact Sheet to determine if their location is included. Once confirmed as eligible, employees will receive an invitation email from Computershare within eight weeks of their first payroll date, inviting them to join the GESPP.
Steps to Join GESPP
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Receive Your Invitation: Eligible employees will be contacted via an invitation email from Computershare. This invitation is crucial as it marks the beginning of the enrollment process.
Enroll in the Plan: Enrollment is conducted online through the EquatePlus platform. Employees can access this platform directly if they are on the Shell network, or through a specific single sign-on (SSO) link provided in the invitation if they are not on the network. This step is critical as it formalizes the employee’s participation in the GESPP.
Choose Your Contribution Schedule: Participants have the flexibility to choose how they spread their contributions. Whether it’s equal monthly contributions from January to November, a single contribution coinciding with an annual bonus, or spread over a few months, the choice allows participants to manage their cash flow according to personal circumstances.
To join the GESPP during a plan year, employees must enroll by October 15th. If enrollment occurs after this date, contributions will commence in the subsequent plan year. This deadline ensures that all administrative processes are completed in time for the participant to benefit from the plan year’s final contributions in November.
CONTRIBUTION OPTIONS AND LIMITS
Monthly Contribution Options
The GESPP offers employees a flexible way to invest in company shares through payroll deductions. Employees can opt to make monthly contributions from January to November directly from their net pay. This flexibility allows employees to adjust their investment according to their financial situations throughout the year. The process for changing contribution amounts is straightforward: employees can select the 'Change' button next to their monthly contribution entry within the Payment information section, enter a new amount, and then click 'Next' to confirm the changes.
One-time Contributions
In addition to regular monthly contributions, GESPP participants have the option to make one-time contributions. This can be particularly advantageous for employees who receive a yearly bonus and prefer to invest a lump sum. Employees can choose to make all their contributions in a single month, such as February, aligning their investment with their financial influx.
Maximum Yearly Contribution
The maximum annual contribution that a United States employee (US1 or US2) can make to the GESPP is $6,335 in 2024 ($575 per month for 11 months). This limit is designed to maintain the exclusivity and benefits of the plan while allowing ample opportunity for employees to participate significantly in the company's growth. The annual maximum contribution is converted to local currencies using the foreign exchange rate ensuring fairness and consistency across all participating countries. Employees need to be mindful of their contribution amounts to ensure they do not exceed this limit or allocate all their net pay to GESPP contributions in any single pay cycle.
SHARE PURCHASE AND DISCOUNTS
When Shares Are Purchased
The GESPP operates with a unique purchasing schedule that maximizes benefits for its participants. Shares are typically purchased at the end of the plan year using the total contributions collected from employees throughout the year. The exact timing aligns with the first trading day after the end of the plan year, ensuring that employees benefit from the most recent share price adjustments.
How Discounts Are Calculated
The GESPP provides a substantial benefit by offering a 15% discount on Shell shares applied to the lower price of two critical dates—the price on the first trading day of the plan year or the price on the first trading day after the plan year ends. For instance, if the share price was $55.98 at the start and $65.90 at the end of the year, the lower price of $55.98 would be used. With the 15% discount, the purchase price for employees would then be reduced to $47.58 per share, offering a significant savings and investment advantage.
This strategic pricing mechanism, known as the "look-back provision," ensures that employees are always given the best possible entry point into share ownership, reflecting Shell's commitment to aligning employee and shareholder interests. The potential for additional shares acquired through this discount can significantly enhance the value of an employee's investment portfolio, making participation in the GESPP a wise financial decision.
RECEIVING AND MANAGING SHARES
Share Holding Options
Upon the conclusion of each plan year, Shell employees' contributions to the Global Employee Share Purchase Plan (GESPP) are converted into shares. These shares are typically transferred to the participants into a Fidelity account within the first 14 days of trading in January. This transfer allows the shares to be eligible for any dividends Shell may declare. Employees have the flexibility to manage these shares through their EquatePlus account, where they can also opt to transfer shares to their personal brokerage account without incurring transaction costs.
Dividend Payments
Dividend payments present a significant benefit for GESPP participants. If employees hold shares on the dividend record date, they will have the choice to either reinvest these dividends or take them as cash. This option provides a flexible approach to managing dividends, aligning with individual financial strategies and preferences.
Selling Shares
Participants in the GESPP have the option to sell their shares directly through their Fidelity account, shares can be sold or managed online or by contacting a Fidelity representative. The proceeds from the sale of shares within a Fidelity account can be managed according to the participant’s instructions, with details on transaction fees available directly from Fidelity.
TAX AND LEGAL IMPLICATIONS
Tax on Contributions
Contributions to the GESPP are made from post-tax income. In most jurisdictions, the discount received on the purchase price of shares is subject to income tax and/or social security contributions. This means that while the initial contribution is made with net income, the benefit derived from the discounted share price may incur additional taxes.
Tax on Discounted Shares
The tax treatment of discounted shares received through the GESPP varies depending on whether employees remain on the same payroll from which their last contribution was deducted. If employees are still on the same payroll, the full number of shares purchased under the plan is delivered into their Fidelity account, and any applicable taxes on the bonus shares are deducted from their normal monthly salary. This typically occurs in the February payroll but may vary based on employment location.
Conversely, if employees are no longer on the same payroll, a number of shares equivalent to the withholding tax liability are deducted before the shares are delivered. The withholding amount is calculated using the marginal rate in the relevant jurisdiction. In some cases, if the actual withholding rate applied is less than the marginal rate, a tax return may be necessary to reclaim any excess.
Reporting Requirements
Employees participating in the GESPP, especially those in certain locations, must comply with local reporting requirements concerning their holdings of Shell shares. This includes reporting dividends received and any capital gains realized upon the sale of shares. The Country Tax Guide provides detailed guidance on these reporting obligations. Additionally, under regulations such as the Markets in Financial Instruments Directive (MiFID II) and the Foreign Account Tax Compliance Act (FATCA), participants may need to provide additional information when selling shares. These regulations are designed to improve transparency and prevent tax evasion.
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Additional Resources:
- Using Fidelity BrokerageLink®: A Comprehensive Guide.. https://www.twadvisor.com/articles/using-fidelity-brokeragelink-a-comprehensive-guide/ .
- Shell Share Plans: GESPP.. https://www.shellshareplans.com/gespp .
Disclosures
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