Employee Benefit Plans, Except for Stock Option Plans

Statute: § 551.22(10), Wis. Stats.

Used for: Securities issued in connection with an employee stock purchase, savings, pension, or profit-sharing plan (does not include stock option plans).

Note: If the securities to be issued upon exercise of the options qualify for a separate registration exemption or otherwise are not subject to registration, no filing is required under this section.

Filing requirement:

• If the plan is qualified under section 401 of the federal Internal Revenue Code or does not provide for contribution by employees: Self-Executing. No filing or Consent to Service of Process is necessary in order to claim this exemption.

• If the plan does not qualify for the exemption on a self-executing basis: Notice Filing, as set forth at § DFI-Sec 2.03, Wis. Adm. Code.

• Filing fee: $200, as set forth at § DFI-Sec 7.01(2)(b), Wis. Adm. Code made payable to Wisconsin DFI-Division of Securities.
• Form required: There is no required form. File a cover letter, the fee, and the required exhibits at least ten days prior to the offering in this state, referencing the statute or rule section under which the notice is filed.
• Exhibits required: A copy of the prospectus, offering document, all other material to be delivered to offerees in connection with the transaction, as required by § DFI-Sec 2.01(6), Wis. Adm. Code, and all other information the Division may require after the filing. If advertising is published or circulated in connection with the transactions or the securities underlying the transactions for which this exemption is claimed, it must be filed with the Division and may not be used unless and until the Division has allowed its use, unless exempt from this requirement under § DFI-Sec 7.02(1), Wis. Adm. Code.
• Review time: Ten calendar days, unless extended pursuant to § DFI-Sec 2.03(2), Wis. Adm. Code.

• However, if the plan qualifies for the federal registration exemption in Rule 230.701 under section 3(b) of the Securities Act of 1933 ("701 Plan"), a self-executing exemption is available in § DFI-Sec 2.02(9)(m), Wis. Adm. Code.

Administrative Code references: §§ DFI-Sec 2.01(6) and 2.02(9)(m), Wis. Adm. Code.

Frequently asked questions:

Q: Is a filing required in order to claim this exemption?

    A: A notice filing is required only for plans which are not qualified under Section 401 of the Internal Revenue Code and which provide for contributions by employees. Plans that are exempt under federal Rule 230.701 ("701 Plan") may rely on the self-executing exemption set forth at § DFI-Sec 2.02(9)(m), Wis. Adm. Code.

Q: Is a filing required for a plan that is qualified under Section 401 of the Internal Revenue Code, but provides for contributions by employees?

    A: No. A Section 401-qualified plan is exempt on a self-executing basis. A filing is required for plans that are both non-Section 401 qualified and involve contributions by employees.

Q: Is a filing required for a plan that does not qualify under Section 401 of the Internal Revenue Code, but does not provide for contributions by employees?

    A: No. A non-contributory plan is exempt on a self-executing basis. A filing is required for plans that are both non-Section 401 qualified and involve contributions by employees.

Q: Does this exemption apply to employee stock option plans?

    A: No. Such plans are referenced in § DFI-Sec 2.02(9)(f), Wis. Adm. Code, which requires a filing and $200 fee. However, if the stock option plan qualifies for the federal registration exemption under Rule 230.701 under § 3(b) of the 1933 Act ("701 Plan"), no filing or approval is required. See § DFI-Sec 2.02(9)(m), Wis. Adm. Code.

Important interpretive letters:

12/14/90 letter re: Kwik Trip, Inc. A non-contributory employee benefit plan that did not involve the furnishing of value, monetary or otherwise, by employees in exchange for units of a limited partnership interest, for which there was no public market, was exempt from registration under § 551.22(10), Wis. Stats., on a self-executing basis.

11/11/88 letter re: Best Holding Corporation. A filing is required for plans which both (a) are not qualified under Section 401 of the Internal Revenue Code and (b) provide for contribution by employees. In this case, a notice filing was required since the profit sharing plan was not qualified under Section 401 of the Internal Revenue Code and involved contributions by employees.

2/25/85 letter re: North Shore Savings and Loan Association. Because the plan was qualified under Section 401 of the Internal Revenue Code, the exemption was self-executing. No notice filing was required.

History:

Adopted on January 1, 1970. Different from Uniform Securities Act section 401(a)(11) in that the Wisconsin statute expressly includes not only investment contracts, but any other security issued in connection with an employee's stock purchase, savings, pension, profit sharing or similar benefit plan. In addition, the Wisconsin statute expressly exempts from notice filing to perfect this exemption plans, which are "qualified under section 401 of the internal revenue code and which [do not] provide for contribution by employees." The time frames under the Uniform Act and the Wisconsin statute differ substantially.

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