Employee Stock Purchase Plans 60 ESPPs are not qualified retirement plans. Some of these plans, such as 401(k) plans, withhold money before you pay any taxes on it. Next comes the offering period, which is usually six months, but can be any length the company chooses. Most do not have offering periods beyond one year. Tip Check the details of your company's ESPP for any special conditions not covered in this general discussion. During the offering period, the money deducted from your check is accumulating in an account. At the end of the offering period, the money buys company stock, often at a discount. The purchase arrangement is one of the key benefits of an ESPP. Some companies offer a discount of up to 15 percent. However, the way the plan decides the stock's price is the really special aspect of the plan. The plan looks at the stock's price at the beginning of the offering period and at the end of the offering period. Whichever number is lower is the price you pay for the stock. Any discount applies to this price. For example, say your ESPP's offering period is six months and pays a 15 percent discount. The stock's price at the beginning of the offering period is $30 per share and $35 per share at the end. The plan would use the $30 per share price as its starting point. The 15 percent discount reduces the price to $25.50 per share. You have just bought stock worth $35 per share for $25.50 per share. That's a 38 percent return (actually the return is higher because you are paying in over the course of the offering period, rather than one payment). It doesn't get much better than that. If things don't go well and you want out of an ESPP, you can usually get your money back if you withdraw before the end of the offering period. Check the details of your plan for the particulars.