Mentor Graphics, owned by the German engineering group Siemens, offers its employees the opportunity to participate in the company’s Share Matching Plan.  The enrollment window for the Plan is now open, and closes December 12th.  If you’re planning to participate, you’ll need to act fast if you haven’t already. Here’s what you need to know.

Background

Under the Share Matching Plan, employees other than senior managers may invest a specified part of their compensation in Siemens stock on a monthly basis over a period of twelve months. Shares are purchased at market price at a predetermined date once a month.  Senior managers may invest a specified part of their variable (bonus) compensation in Siemens stock. The shares are purchased at the market price at a predetermined date in the second quarter.

If the employee remains employed for three years, he/she will receive one additional share for each three shares purchased. The matching shares are received in February of the fourth year after the year of purchase.  As an example, an employee who enrolls in the Plan this year, purchases stock in 2019, and remains employed by Mentor until 2022 will receive one additional share in February of 2022 for each three shares purchased in 2019.

Example

You enroll in the Plan in 2018, and purchase sixty (60) shares in 2019.  You remain an employee through the year 2021. In February 2022, Siemens will issue you another twenty (20) shares (a “1 for 3 match”).  Note that matching shares are only awarded if you’ve been employed for the full three years prior to the year the matching shares are awarded. 

Considerations

The matching shares are treated as a non-cash benefit, on which taxes and applicable contributions must be paid in the year the matching shares are awarded.

There are two options to pay these taxes: “Sell to cover” and “Hold all and pay taxes via payroll”.

“Sell to cover”, which is the default option, results in a portion of the matching shares being sold to cover the estimated tax liability for the value of all matching shares awarded.  Because this amount is only an estimate, the employee’s tax and contribution responsibility may be either more or less than the proceeds of the stock sale.

“Hold all and pay taxes via payroll” will result in withholding from the employee’s payroll of the estimated tax and contribution. Either some of the matching shares are sold to provide the employee’s estimated tax and contribution owed, or all of the matching shares are issued to the employee with the amount of the estimated the tax and contribution cost withheld from the employee’s payroll.

Mentor employees considering enrolling in the Share Matching Plan should consult both the company to verify the terms of the program, as well as their tax professional and investment advisor prior to participating.  

Investing involves risk.  Please consider carefully the risks of investing before you invest. It is possible to lose some or even all of your investment.

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