Rule 16

[Guest t936]

Must employer matching contributions that are made with employer stock be reported under Rule 16b?

[E as in ERISA]

I believe that Kirk Maldonado is the resident expert on this topic. Hopefully he will respond.

My understanding is that most qualified plan transactions (except "discretionary transactions") were exempt. Discretionary transactions only included certain transfers and distributions. The SEC release on August 28 continued the old exemption for qualified plans and created a special rule for certain discretionary transactions. See the link posted on this cite today.

So I believe that the answer is "NO". I am not aware of anything that differentiates between matches made in stock and matches made in cash.

[Kirk Maldonado]

The contribution of company stock in satisfaction of an obligation to make matching contributions need not be reported. However, the amount of that stock must be included in the person's stockholdings in the subsequent Section 16 reports that the person does file.

[E as in ERISA]

For the stock to be reported as a holding on a form, does it matter whether the stock is purchased with cash or contributed "in kind" (or whether it was derived from employer or employee contributions, for that matter)?

[Kirk Maldonado]

No.

[david shipp]

In a plan that unitizes employer stock, rather than accounting on a share basis, how would the section 16 "reporting person" know how many shares are involved in a transaction?

Different question - will the Sarbanes-Oxley reporting changes practically mean the section 16 reporting persons really shouldn't invest in employer stock through a retirement plan such as 401(k)? The relaxed reporting date provided in the recent SEC regs are helpful, but will still require changes in the procedures of most administrators.

[MGB]

The rule for trades is reporting to the SEC within 2 days. For trades within a qualified plan, the rules provide for an additional 3 days to obtain the information on the number of shares traded. Although the SEC has no jurisdiction over the plan administrator, the insiders subject to these rules certainly have control over the plan administrator. The SEC rules say they expect plan administrators to provide the share information to the insider within 3 days of the trade. Therefore, the plan administrators must set up procedures to do this.

[Guest asire2002]

I have a few questions I was hoping someone would know the answer to:

1. Do the 16(B) exemptions in Rule 16b-3©-(f) apply only to officers and directors and not to 10% owners?

2. Why is an employee's contribution to a qualified plan, which is invested in company stock pursuant to an investment allocation direction on file with the plan, not considered a discretionary transaction that is reportable on Form 4? Is it because there is no intraplan transfer involved? But in this situation the monies are typically first contributed in cash, held in a funds awaiting purchase account, and then invested in stock. Why isn't that an intra-plan transfer?

3. Are participants considered to have chosen the execution date of a trade inside a plan if the plan has administrative procedures regarding trades so that, e.g., a participant could expect a purchase or sale initiated on Day 1 to be initiated on Day 1 or Day 2 and settled on Day 3?

4. Can anyone tell me under what circumstances, if any, a trust would be subject to the reporting requirements of 16(a)? I'm confused as to the interaction between 16a-2, 16a-3 and 16a-8. If a trustee has voting or investment power over the stock held in the trust, and that stock exceeds 10% of a class, it seems the trust would be a reporting person, as would any beneficiary of more than 10% of the class to whom voting rights were passed through. But since the plan is subject to ERISA, is that right? Are there any succinct summaries of the requirements that you could share with me?

5. If a participant elects to have any dividends paid on shares held in the plan automatically reinvested in employer stock, is that a discretionary transaction that might need to be reported if there has been an opposite-way discretionary transaction in the prior 6 months? Or would this be exempt from reporting under Rule 16a-11?

Thanks so much for any help you can provide.