If you work at McKesson, you may be eligible to enroll in the employee stock purchase plan (ESPP). To help you make the most of this opportunity, we’ve put together a comprehensive guide to all the ins and outs of this program, from how it works to how you enroll.
Make More Money from your ESPP with Benny’s New Program
Benny 2.0 automatically manages your Employee Stock Purchase Plan (ESPP) to make you more money without disrupting your take-home pay.
TLDR;
McKesson’s ESPP is one of the most underrated benefits especially with the value it offers – allowing employees to buy McKesson stock at a 15% discount.
Key Features:
- Discount: 15%
- Contributions: 15% of salary
- Participation Period Length: 3 months
How it Works:
- Payroll Contributions: Set aside up to 15% of each paycheck for the ESPP.
- Stock Purchase: At the end of 3 months, your accumulated funds buy McKesson stock at a discounted price.
- Brokerage Account Deposit: Your shares go directly into your account, ready for you to sell for immediate gains or hold for potential growth.
Wondering how to get the most out of your ESPP (contributing the full 15% of your salary) without it impacting your cash flow? Check out how Benny can fund it for you.
What is an ESPP?
An Employee Stock Purchase Plan (ESPP) allows employees to buy company stock at a discounted price, usually through payroll deductions. This means you set a % or $ amount and each and every paycheck, a portion of your paycheck is set aside to purchase company stock at certain increments (most often 6 months but each company can do theirs differently, like McKesson who does 3 months). For more insights, visit our overview of ESPPs.
Summary of McKesson ESPP
McKesson’s ESPP stands out with a 15% discount on stock purchases, with enrollments 4 times a year in January, April, July, and October. Each of these enrollments is for a 3-month period:
February 1 – April 30
May 1 – July 31
August 1 – October 31
November 1 – January 31
Employees can contribute up to 15% of their salary, capped annually at $25,000 FMV (or $21,250 of actual contributions).
Should You Participate In McKesson’s ESPP?
McKesson’s ESPP is a great benefit. You get to buy stock at 15% discount – an instant win. If you hold the shares and the price goes up, you win again because you can sell your shares at a premium. You also have the opportunity to sell right away and this is where the ESPP shows its unique utility.
Here is what we’ve seen some folks do with their ESPP earnings:
- Build an emergency savings fund.
- Pay off high-interest debt.
- Use towards your retirement savings (funding IRA).
- Save for a down payment on a house.
- Create or contribute to a college savings account.
Before you get to participating, most folks recommend maxing out the match to your 401(K) first. After that, if cash is available, start looking at your ESPP. If you are short on available cash or simply don’t want to use your own, check out how Benny can fund it for you.
What happens if the stock price goes down? Short answer: you’re protected during the participation period. ESPPs come with a built-in safeguard against such fluctuations during the participation period.
To explain: Over the period, the company sets aside money from your paycheck but doesn’t buy stock immediately. Instead, they accumulate these contributions and make a lump sum purchase at the end of the period. The purchase price is then discounted by 15% (or more if a lookback is in play) from the stock price on that final day.
Let’s consider two scenarios to illustrate this protection:
Stock Price Increases: Imagine you contribute $8,500 over six months, and the stock price skyrockets to $10,000 per share during that time. You would receive 1 share valued at $10,000 (your $8,500 contribution plus a 15% discount).
Stock Price Decreases: Conversely, if the stock price drops to $1 per share, you would get 10,000 shares, still equaling a value of $10,000 (your $8,500 contribution with the 15% discount applied).
As you can see, whether the stock price goes up or down, you end up with shares valued at around the total amount of your contributions plus the discount – insulated from stock price movement during the participation period.
Once you own the shares, you are now subject to stock price fluctuations.
Want to see how much you can earn? Check out our ESPP calculator, which shows you gains from the 15% discount.
How to Participate in Mckesson’s ESPP?
Enrollment can be done within McKesson’s benefit enrollment platform, with open enrollment in January, April, July, and October. Participation involves setting aside a portion of your salary, up to 15%, to buy discounted stock every three months.
Selling Your ESPP Shares
Upon purchase, shares are deposited into your brokerage account, where you can choose to sell immediately or hold. Understanding the tax implications of selling is essential. If you sell right away, you’ll pay ordinary income tax on the gain from the discount.
If you wait 1.75 years after the purchase, you’ll be taxed at long-term capital gains rate (often a lower rate).
If you sell right away, you lock in the gain. If you hold, you have more upside potential but there’s nothing saying the stock price can’t go down, and you end up with shares worth less than what you would have paid.
How Does Benny Help He Make the Most of McKesson’s ESPP?
Benny makes participating in your ESPP easy.
First, we use our deep ESPP knowledge to help you understand the ins and outs of your ESPP. Simply start up a chat with us and we’ll share what we know.
Second, we can provide you the cash you need to max out your ESPP. We do this by matching your ESPP paycheck deductions, getting you to participate fully without impacting your take-home pay.
For example, if you contribute $750 per paycheck, Benny deposits an $750 amount into your bank account every pay period. Easy as that.
Make More Money from your ESPP with Benny’s New Program
Benny 2.0 automatically manages your Employee Stock Purchase Plan (ESPP) to make you more money without disrupting your take-home pay.