But lack of participation is still a problem. Shapiro attributes that to people not willing to see their paychecks get smaller. “If you want to participate in the plan, you have to be able to afford the payroll contribution,” he said.

In an effort to blunt the paycheck problem, Shapiro said his company works with public companies through a feature called “cashless participation,” for which he received a private letter ruling from the IRS giving the company the go-ahead to implement its Carver Edison ESPP loan program, while retaining qualified tax status for its employee stock purchase plan.

The program, Shapiro explains, makes it possible for more employees to take advantage of their employers’ plan without actually seeing their paychecks get smaller. It allows eligible employees to maximize their ESPP contribution with limited payroll deductions, Shapiro said.

With cashless participation, Shapiro explained that employees sign up for the ESPP and select the amount to be taken out of their paychecks—say, $100 every two weeks for six months. Right before the end of that six-month period, Carver Edison writes a check to the employer through a temporary interest-free loan on behalf of the employee, maximizing that person’s contribution.

The employer then issues the appropriate amount of stock and Carver Edison sells enough shares to repay the loan. The net share, which is always more than employees could purchase on their own, are deposited in their brokerage accounts.

Shapiro agreed that the plans can be confusing for employees, especially if they have never before owned stocks.

“What we have had to do is change the way the industry thinks and talk to employees, not only about the cost component but about the education component as well because employees don’t know how this works,” he said.

Shapiro would not reveal the companies he has worked with or is working with, but he said they are on track to onboarding 10,000 to 15,000 employees in the program.

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