Your 2024 Guide To T-Mobile's ESPP: Everything You Need To Know
by Andy Kalmon
Jul 9, 2024
TLDR;
T-Mobile's ESPP is one of the most underrated benefits, especially with the value it offers - allowing employees to buy T-Mobile stock at a 15% discount (could be more, see lookback feature).
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Use our ESPP Calculator to see your potential gains
Key Features of T-Mobile's ESPP:
Discount: 15%
Contributions: 15% of salary
Lookback feature: Yes (6 months)
Participation Period Length: 6 months
How it works:
Payroll Contributions: Set aside up to 15% of each paycheck for the ESPP.
Stock Purchase: At the end of 6 months, your accumulated funds buy T-Mobile 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). For more insights, visit our overview of ESPPs.
Summary of T-Mobile's ESPP
T-Mobile's ESPP stands out with a 15% discount on stock purchases.
🔍 You can enroll twice a year between February 15 - March 15 and August 15 - September 15. Each of these enrollments is for a 6-month period:
April 1st - September 30th
October 1st - March 31st
Employees can contribute up to 15% of their salary, capped annually at $25,000 FMV (or $21,250 of actual contributions).
In addition to the standard discount, T-Mobile also offers a lookback, which can return you a gain of even more than the 15% every 6 months.
T-Mobile's ESPP Lookback
T-Mobile's ESPP stands out with its Lookback feature, a huge boost to ESPP earnings. Here's how it works:
🔍 The Lookback Mechanism: Employees have the advantage of buying shares at the lower price of either the start or the end of the offering period.
For example, if the stock was $100 on March 1st but rose to $115 by August 31st, you get to buy at just $85 per share (remember, you pick the lower of the two prices, which in this case is $100 and then apply a 15% discount), resulting in a $30 gain per share.
Without a lookback feature, the discount would be on the $115, resulting in a purchase price of $97.75, returning to you a gain of $17.25. This is a nice return, but lacks the extra boost you get with the lookback.
This Lookback feature in T-Mobile's ESPP is nothing short of incredible, offering a significant edge in stock investment returns.
Should You Participate In T-Mobile's ESPP?
T-Mobile's ESPP is a great benefit. You get to buy stock at a minimum 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 (gains from lookback not included).
How To Participate in T-Mobile's ESPP?
Enrollment can be done within T-Mobile's benefit enrollment platform, with open enrollment between February 15 - March 15 and August 15 - September 15. Participation involves setting aside a portion of your salary, up to 15%, to buy discounted stock every six months.
Looking for help in figuring out how much you want to contribute? Reach out to the Benny team.
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 1.5 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.
Make More Money from your ESPP with Benny's New Program
Benny provides the funding and management you need to maximize your ESPP without affecting your take-home pay. Join the hundreds of employees who are gaining, on average, an extra $3,000 annually through their ESPP with Benny.
