Stopping an Employee Stock Purchase Plan (ESPP) with E*TRADE can seem like a daunting task, but it's a relatively straightforward process once you understand the steps involved. Whether your financial goals have shifted, you need the cash for other purposes, or you simply want to re-evaluate your investment strategy, understanding how to cease your contributions and manage your existing shares is crucial.
Ready to take control of your ESPP with E*TRADE? Let's dive in!
Step 1: Understand Your ESPP Plan Documents
Before you do anything, the most important first step is to familiarize yourself with your specific company's ESPP plan documents. While E*TRADE facilitates the management of your ESPP, the rules governing contributions, withdrawals, and sales are ultimately set by your employer.
Why is this crucial? Every ESPP is unique. Your company's plan will dictate critical details such as:
Enrollment and Offering Periods: When can you enroll or make changes?
Contribution Limits: What's the maximum you can contribute?
Withdrawal Rules: Can you withdraw accumulated contributions before purchase? Are there any penalties?
Holding Periods: Are there any restrictions on selling shares immediately after purchase?
Tax Implications: How are your contributions and sales taxed? This is often the most complex part and varies based on whether it's a "qualified" or "non-qualified" plan, and how long you hold the shares.
Where to find them?
Your Company's HR or Benefits Portal: Often, you'll find a dedicated section for your stock plan.
E*TRADE's "Morgan Stanley at Work" or "Stock Plans" Section: Log in to your E*TRADE account, and look for a section related to "Stock Plans" or "Morgan Stanley at Work." You should be able to access your plan documents there.
Contact Your Company's Plan Administrator: If you're having trouble locating the documents, reach out to your HR department or the designated plan administrator within your company.
Step 2: Decide on Your Strategy: Stopping Contributions vs. Selling Shares
Once you understand your plan, you need to determine your immediate goal. Are you looking to:
Stop future payroll deductions? This means no new money will be contributed to your ESPP.
Withdraw accumulated, unpurchased funds? This applies to money already deducted from your paycheck but not yet used to buy shares.
Sell shares you've already purchased? This involves liquidating the company stock you currently hold in your E*TRADE account.
You might do one, two, or all three of these actions.
Step 3: Stopping Future ESPP Contributions (Payroll Deductions)
This is usually the simplest step if you just want to prevent further money from being taken from your paycheck.
Sub-heading: Online Through E*TRADE
Log In to Your E*TRADE Account: Go to etrade.com and log in with your credentials.
Navigate to Your Stock Plan Account: Look for a section like "Morgan Stanley at Work," "Stock Plans," or similar. This might be under your "Accounts" or "Portfolio" tab.
Find Your ESPP Details: Within your stock plan section, locate the specific details for your Employee Stock Purchase Plan.
Locate "Contribution Elections" or "Payroll Deductions": There should be an option to view or modify your contribution elections. This is where you set the percentage of your pay you want to contribute.
Change Contribution to 0% or Withdraw:
To stop all future contributions: Change your contribution percentage to 0%.
Some plans might have a "withdraw" or "suspend" option directly for current offering periods. If this is available and you want to stop immediately, select it.
Confirm Your Changes: Review the changes carefully and confirm them. You'll likely receive a confirmation number. Keep this for your records.
Sub-heading: Through Your Company's HR/Payroll Portal
Sometimes, the change needs to be initiated directly with your employer's HR or payroll system. Even if E*TRADE manages the account, your company's internal systems might be responsible for stopping the payroll deduction.
Check your plan documents for specifics. If the E*TRADE portal doesn't allow you to change your contribution to 0%, your plan likely requires you to do it through your company's HR or payroll portal (e.g., Workday, SAP SuccessFactors, etc.).
Follow the instructions provided by your employer to adjust or stop your payroll deduction for the ESPP.
Important Note: Be mindful of deadlines. Most ESPPs have specific enrollment or change periods. If you miss a deadline, your current contribution percentage might remain in effect until the next offering period.
Step 4: Withdrawing Unpurchased Funds (If Applicable)
If you've been contributing to your ESPP but shares haven't been purchased yet (i.e., you're in the middle of an offering period), you might have accumulated cash sitting in your ESPP account.
Sub-heading: How to Access and Withdraw Funds
Log In to E*TRADE: As in Step 3, log in to your E*TRADE account and navigate to your stock plan details.
Look for "Withdraw Funds" or "Cash Balance": Within your ESPP section, there should be an option to view your current cash balance or "withdraw" funds.
Initiate a Withdrawal: Select the option to withdraw. You will likely need to:
Specify the amount you wish to withdraw (often, you must withdraw the entire accumulated balance if you're stopping participation for the period).
Choose the destination for the funds (typically, a linked bank account). If you haven't linked one, you'll need to do so first.
Confirm and Submit: Review all details and confirm the withdrawal.
Key Consideration:
Plan Rules: Not all ESPPs allow you to withdraw accumulated funds mid-period. Some may only refund contributions if you terminate employment or upon the purchase date if you've reduced your contribution to zero. Refer back to your plan documents!
Timing: Funds typically take a few business days to process and appear in your linked bank account.
Step 5: Selling ESPP Shares
If you have already purchased shares through your ESPP and they are held in your E*TRADE account, you'll need to sell them to liquidate your investment.
Sub-heading: Online Through E*TRADE
Log In to E*TRADE: Access your E*TRADE account.
Navigate to Your Stock Holdings: Go to your portfolio or holdings section where your company stock is listed. This is usually within your main brokerage account, even if it originated from an ESPP.
Select the Shares to Sell: Find the specific company stock you wish to sell.
Place a Sell Order:
Choose "Sell" as the action.
Specify Quantity: Enter the number of shares you want to sell. You can sell all or a portion.
Choose Order Type:
Market Order: Sells immediately at the best available market price. Good for quick sales, but the price can fluctuate.
Limit Order: Allows you to set a minimum price you're willing to sell at. Your order will only execute if the stock reaches that price. This offers more control but might not execute immediately.
Review and Confirm: Carefully review the order details (stock symbol, quantity, order type, estimated proceeds) before confirming.
Important Considerations When Selling Shares:
Holding Periods/Blackout Periods: Your company's ESPP might have company-imposed holding periods or "blackout periods" during which employees are restricted from trading company stock (e.g., around earnings announcements). Always check your company's insider trading policy and ESPP plan documents. E*TRADE will usually enforce these restrictions, preventing you from placing an order.
Tax Implications are Significant: Selling ESPP shares has specific tax consequences. The discount you received on the purchase is typically taxed as ordinary income, while any additional gain (or loss) beyond that is treated as a capital gain (or loss). The holding period (how long you held the shares) will determine if it's a short-term or long-term capital gain, which affects the tax rate.
Disqualifying Disposition: Selling shares before holding them for a specific period (generally two years from the offering date and one year from the purchase date) can lead to a larger portion of the gain being taxed as ordinary income. This is often recommended if you want to lock in the discount profit immediately, even with higher taxes.
Qualifying Disposition: Holding the shares beyond these periods can result in more favorable capital gains tax treatment.
Consult a Tax Advisor: It is highly recommended to consult with a qualified tax advisor before selling ESPP shares to understand your specific tax obligations and optimize your strategy. E*TRADE does not provide tax advice.
Commissions/Fees: While many brokerages offer commission-free stock trades, always check E*TRADE's current fee schedule for stock plan transactions, as they can sometimes differ.
Step 6: Verify and Confirm
After making any changes – stopping contributions, withdrawing funds, or selling shares – always:
Check Your E*TRADE Account Activity: Review your transaction history and account statements to ensure the changes are reflected correctly.
Confirm with Your Payroll (for contributions): If you stopped payroll deductions, verify with your next paycheck that the ESPP deduction is no longer appearing.
Save Confirmation Emails/Screenshots: Keep records of any confirmation messages or emails you receive from E*TRADE or your company.
By following these steps, you can effectively manage and stop your ESPP participation with E*TRADE. Remember, understanding your specific company's plan is paramount to a smooth process.
10 Related FAQ Questions (How To)
Here are 10 common "How to" questions related to stopping an ESPP in E*TRADE, with quick answers:
How to find my ESPP plan documents on E*TRADE?
Log in to E*TRADE, navigate to the "Morgan Stanley at Work" or "Stock Plans" section, and look for links to your company's specific plan documents or prospectus.
How to change my ESPP contribution percentage on E*TRADE?
Log in to your E*TRADE stock plan account, find the "Contribution Elections" or "Payroll Deductions" section, and adjust the percentage. If unavailable there, check your company's internal HR/payroll portal.
How to withdraw cash accumulated in my ESPP before purchase?
Within your E*TRADE stock plan account, look for an option like "Withdraw Funds" or "Cash Balance" and initiate a transfer to your linked bank account, adhering to your plan's specific withdrawal rules.
How to sell ESPP shares I've already purchased through E*TRADE?
From your E*TRADE portfolio, select the company stock, choose "Sell," enter the quantity and order type (e.g., market or limit), and confirm the transaction.
How to link a bank account to my E*TRADE account for withdrawals?
Go to the "Transfers" or "Banking" section in your E*TRADE account, select "Add External Account," and follow the prompts to link your bank account using routing and account numbers.
How to check for blackout periods before selling my ESPP shares?
Refer to your company's insider trading policy, ESPP plan documents, or contact your company's HR/legal department. E*TRADE may also display warnings if you attempt to trade during a blackout period.
How to understand the tax implications of selling ESPP shares?
The discount is generally ordinary income, and additional gains are capital gains. The classification (qualified vs. disqualifying disposition) depends on holding periods (often 2 years from offering date and 1 year from purchase date). Consult a qualified tax advisor for personalized advice.
How to get a confirmation that my ESPP contributions have stopped?
Check your ETRADE account for updated contribution percentages, look for confirmation emails from ETRADE, and verify your next paycheck statement for the absence of the ESPP deduction.
How to re-enroll in my ESPP after stopping contributions?
You will typically need to wait for the next open enrollment period specified by your company. Log in to your E*TRADE stock plan account or your company's HR portal during that period to re-elect your contribution.
How to contact E*TRADE for help with my ESPP?
You can find E*TRADE's contact information (phone numbers, chat support) on their website under the "Contact Us" section. Look for specific support options related to "Stock Plans" or "Morgan Stanley at Work."
