The NRG Employee
Stock Purchase Plan
(ESPP)
May 2016
Table of Contents
Introduction
• What is an Employee Stock Purchase Plan (ESPP) and why
implement it?
• Brief process introduction
Plan Details
• Characteristics of the plan
• Tax considerations
Frequently Asked Questions
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Introduction
3
ESPP? What is it?
ESPPs allow employees to buy company stock
via payroll deductions – in NRG’s case, we are
offering the stock at a 15% discount as an
additional benefit
• Why are we offering this?
—The ESPP is another example of how we
believe that direct employee ownership is
critical to our shared success
—Creates an additional avenue for
ownership above broad-based
equity grants
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Brief Process Introduction
Employee elects to participate at
1-10% of biweekly base salary
June 2016
July 1, 2016
Employee
Election
Purchase
Period
Begins
NRG purchases and distributes shares at a
15% discount for the employee, using the
money in their account
Early Jan
2017
Dec 31, 2016
Employee
contributions
Purchase
Period
Ends
Shares
deposited
Jan 1, 2018
Shares
available
for sale
Employee’s payroll deductions accumulate in an account
over six months - “Saving-up to buy shares”
June 1 – June 30, 2016: Enrollment Period
July 1 – Dec 31, 2016: Purchase period
 Employees may elect to suspend/withdraw until Dec 16
Dec 31, 2016: Purchase Period end date
Jan 2017 (early): Shares deposited into E*Trade accounts
Jan 2017: First-time account holders receive Activation Notices from E*Trade
Jan 1, 2018: Shares are available for sale
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Plan Details
6
Purchase Price & Date
With the Look-Back feature, the ESPP purchase
price is derived from the Fair Market Value (FMV) of
the stock using the lesser of the market close price
on the first or last day within the Purchase Period
The ESPP purchase dates are typically June 30 and
December 31
The ESPP purchase price will be the FMV discounted
by 15%
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Look-Back Feature
• When the stock price declines from
beginning of the purchase period to the
end, participants receive shares at the
price at the end of the purchase period
• However, when the stock price
appreciates over the course of the
purchase period, participants benefit
from the stock price growth by
purchasing shares at the price on the
opening day of the purchase period
Purchase
Price
$15.00
$10.00
$15.00
$10.00
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Eligibility and Enrollment
• Eligible population — All non-represented and represented, non-temporary employees1
— Part-time employees that work a minimum of 17½ hours per week
— Hired (or negotiated by) 60 days prior to the beginning of the next purchase period2
— Employees may not join in the middle of a Purchase Period
• Purchase Periods last six months — 7/1/2016 – 12/31/2016, 1/1/2017 – 6/30/2017, …
• Elections are made only in the calendar month before the Purchase
Period — 1-10% of annual base salary as of the 1st day of the Purchase Period
— For the purposes of the ESPP, your salary is frozen as of the first day of each Purchase Period
(effectively keeping your ESPP deductions at a fixed dollar amount)
— $25,000 annual contribution cap
— Deductions are post-tax and held in a non-interest bearing account
— Like other payroll deductions, ESPP deductions appear on your pay stub
1Employees
2Hire
of certain subsidiaries may not be eligible to participate in the ESPP
date by May 2nd for the July 1st purchase period, November 2nd for the January 1st purchase period
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Purchase Period
• Elections automatically roll from one Purchase Period to the
next
— If you wish to change your election percentage or discontinue participation, you need to make that election
during the next Enrollment Period
• During the Purchase Period, employees may elect to:
— Suspend contributions: payroll deductions cease1, but accumulated account balance still used to
purchase shares at the end of the purchase period
— Withdraw contributions: payroll deductions cease and account balance refunded to participant
without interest1. If you wish to begin participating again, you must to re-enroll during the next
Enrollment Period
• No withdrawals or suspensions are accepted in the final 15
days of the current Purchase Period
— In other words, on June 15 and December 16 you become committed to purchasing shares on June
30 and December 31, respectively
• Employees terminated during the purchase period will receive
a refund of deductions made during the period
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1Deduction
cessation & refunds processed as soon as administratively feasible
Share Calculation
Example: Set aside 5% of a $25,000 base salary to ESPP
Annual Salary
Election (%)
Annualized Election ($)
Bi-Weekly (26 pay periods)
Per Pay Period Deduction
6 Month Period (13 pay periods)
$25,000
5%
$1,250
/26
$48.08
x 13
Total Contribution (Approx.)
$625.00
Fair Market Value ($ / share)
$10.00
Discount (%)
15%
Discount ($ / share)
$1.50
Employee Purchase Price ($ / share)
$8.50
Total Contribution
Employee Purchase Price ($ / share)
$625.00
$8.50
Calculated Shares
73.53
Actual Number of Purchased Shares
73.53
Number of shares that would have been purchased
without 15% discount =
62.50
Due to rounding, a participant may receive fractionally more than
the actual calculation result (to 2 decimals), but never less
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Share Handling
• Shares will be deposited in the employee’s E*Trade account as
soon as administratively feasible following the close of the
Purchase Period.
—No immediate tax liability resulting from the 15% discount
—First-time account holders receive Activation Notice and Welcome Kits from E*Trade
—E*Trade will send a Smart Alert to active stock plan account holders
All purchased shares are subject to a one-year Holding Period
If an employee terminates, the shares become eligible for sale
• Once eligible for sale, employees can log onto E*Trade and
sell their shares.
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Selling Your Shares
• E*Trade will notify employees once a purchase has been made
— E*Trade will send first-time account holders an Activation Notice and Welcome Kit with all the
necessary information required to access their account and transact shares
— E*Trade will send a Smart Alert to existing account holders
— Contact E*Trade directly for a current listing of transaction fees
• Any “fractional shares” are always sold with the last whole share
— From our example, if you have 21.01 shares, you may sell from 1 to 20 shares, or 21.01 shares, but
you may not sell 21 shares
• In the year ESPP shares are sold, the income recognized by US tax authorities
will be reported on a participant’s W-2. If ESPP shares are sold in a qualifying
disposition, the lesser of the actual gain (FMV on sale date less the actual purchase price)
or the discount will be reported. If shares are sold in a disqualifying disposition, income
reported is equal to the spread between the purchase price and the FMV of the stock on
the purchase date, even if the stock is ultimately sold at a loss. Participants are
responsible for notifying [email protected] when ESPP shares are
sold.
• Participants may not transfer shares to any other account until six months
following the Holding Period
• Participants remain subject to the Company's Security Trading and NonDisclosure Policy
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Frequently Asked
Questions
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Frequently Asked Questions
•What is an Employee Stock Purchase Plan?
•How does the Plan work?
•Is there an incentive to enroll in the NRG ESPP?
•Who is eligible?
•How can I join?
•How do I get access to enroll online?
•Do I need to re-enroll every Purchase Period?
•If I decide not to join right now, will I have another opportunity?
•May I begin participation in the middle of a Purchase Period?
•Can I withdraw from the Plan at any time?
•What happens if I leave the Company?
•How much can I contribute?
•If my salary changes during a Purchase Period, does my contribution change?
•May I increase or decrease my payroll deductions during a Purchase Period?
•May I make a cash contribution to the Plan in addition to my payroll deduction?
•Do I automatically own a share of NRG common stock as soon as its cost has been deducted from
my compensation?
•What happens to the shares purchased for me?
•How can I find out the number of shares purchased for me?
•When can I sell shares purchased through the Plan?
•What happens if there is a stock split, stock dividend or other change affecting NRG common stock?
•Will NRG stock become an option in the 401(k) plan?
•Is my right to purchase shares under an ESPP transferable?
•What are the Tax Implications of buying/selling ESPP shares?
•What is a Disqualifying Disposition?
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Frequently Asked Questions
What is an Employee Stock Purchase Plan?
NRG’s Employee Stock Purchase Plan (ESPP) is an employer-sponsored, qualified 423(b) program as defined
under IRS regulations that allows you to make planned, periodic purchases of NRG stock at a discount through
convenient, biweekly payroll deductions.
How does the Plan work?
You can authorize after-tax payroll deductions of 1% to 10% of your biweekly pay. These amounts accumulate
in payroll for six months – called the Purchase Period – and are used to purchase shares of NRG stock at the end
of the period. NRG will have two Purchase Periods per year: January 1 through June 30 and July 1 through
December 31.
Is there an incentive to enroll in the NRG ESPP?
Yes! Your accumulated payroll deductions will purchase NRG shares at 85% of the lesser of the closing price on
the first or last day of the Purchase Period (or previous closing price if the market is not open on the final day).
For example, if NRG closes at $13.00 on the first day of the Purchase Period and $16.00 on the last day of the
Purchase Period, you will purchase the shares at $11.05 (i.e., $13 x 85%).
Who is eligible?
All regular non-represented employees, and represented employees where and when bargained for, with at least
sixty days of service preceding the first day of the purchase period who work a minimum of 17 ½ hour per week
(employees of certain subsidiaries may not be eligible to participate).
How can I join?
NRG has partnered with E*Trade to make participation in the ESPP easy. You can visit E*Trade’s website
(www.etrade.com/enroll) or call an E*Trade customer service representative at 1-800-838-0908 (NRG’s ticker
symbol is “NRG”). You will be able to enroll in the month preceding the Purchase Period, either June or
December.
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Frequently Asked Questions
How do I get access to enroll online?
Simply go to www.etrade.com/enroll; please refer to the “ESPP Enrollment – E*Trade” document on the Insider
under Human Resources/Compensation.
• Do I need to re-enroll every Purchase Period?
No. Once you make your election, it will automatically carry-over into the next Purchase Period. If you elect to
halt your contributions at anytime, you will need to re-enroll in the Plan if you wish to start contributing again.
• If I decide not to join right now, will I have another opportunity?
Yes. The Enrollment Period is the calendar month before each Purchase Period (June and December).
• May I begin participation in the middle of a Purchase Period?
No. To participate, you must enroll during the Enrollment Period prior to the start of the Purchase Period.
• Can I withdraw from the Plan at any time?
Yes. At any time during the Purchase Period (prior to the last 15 days of the period), you may elect to halt your
payroll contributions and allow whatever you have accumulated so far to purchase shares at the end of the
Purchase Period. You also may elect to halt deductions and have your accumulated contributions refunded to
you, without interest. In either case, this election can not be reversed, however you can elect to participate
again during the next Enrollment Period.
• What happens if I leave the Company?
If at any time you cease to be employed by the Company, your deductions will cease and your accumulated pay
will be refunded to you, without interest. If you retire, you may elect to allow your accumulated payroll
deductions to purchase shares at the end of the current Purchase Period by notifying
[email protected] prior to your last day worked.
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Frequently Asked Questions
• How much can I contribute?
You can contribute up to 10% (whole percentages) of your biweekly base salary, but your annual contribution
may not exceed $25,000. If your salary changes during the purchase period, your payroll deductions will not
change until the following Purchase Period (i.e., if your election results in $15 per pay period deducted from
your pay, that $15 will continue even if your salary changes mid-Purchase Period). Payroll deductions are taken
on an after-tax basis.
• If my salary changes during a Purchase Period, does my contribution change?
No. The percentage you elect is a function of your salary at the start of the Purchase Period, meaning the actual
dollar amount you are contributing will remain constant throughout the entire Purchase Period. In the following
Purchase Period, your actual dollar amount will increase reflecting your new annual base salary. In other words,
your salary is frozen for the duration of the current Purchase Period for the purposes of the ESPP.
• May I increase or decrease my payroll deductions during a Purchase Period?
No. You must wait until the next Enrollment Period to increase or decrease the payroll deductions, effective in
the next Purchase Period. You may withdrawal from participation at any time: see “Can I withdraw from the
Plan at any time?.”
• May I make a cash contribution to the Plan in addition to my payroll deduction?
No. Contributions can only be made via after-tax payroll deductions.
• Do I automatically own a share of NRG common stock as soon as its cost has been deducted from my
compensation?
No. You own the stock once the Purchase Period has closed either on June 30 or December 31, and your
discounted shares have been deposited in your E*Trade account.
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Frequently Asked Questions
• What happens to the shares purchased for me?
After the purchase at the end of the Purchase Period, either on June 30 or December 31, your shares will be
delivered to your E*Trade account as soon as administratively feasible (typically within a week).
• How can I find out the number of shares purchased for me?
E*Trade will send you a Smart Alert with each purchase. You can view the total number of shares purchased for
you as well as other pertinent information by visiting www.etrade.com.
• When can I sell shares purchased through the Plan?
Shares purchased via the NRG ESPP are subject to a 1 year Holding Period. If shares are purchased on June 30,
2016, you will not be able to sell them until July 1, 2017. If your employment with NRG terminates, the Holding
Period no longer applies. You will be subject to tax obligations at the time of the sale. Participants remain
subject to the Company's Security Trading and Non-Disclosure Policy.
• What happens if there is a stock split, stock dividend or other change affecting NRG common stock?
Your shares reserved under the Plan will be adjusted proportionately in the event of a stock split or stock
dividend. In the event of any other change affecting NRG’s common stock, the Board of Directors of NRG will
review the potential for necessary adjustments.
• Will NRG stock become an option in the 401(k) plan?
Having NRG common stock as an option in the 401(k) adds an additional layer of administrative and fiduciary
complexity to the 401(k) plan. NRG is using the ESPP, which offers employees a 15% discount, as the preferred
method for employees to obtain NRG common stock.
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Frequently Asked Questions
• Is my right to purchase shares under an ESPP transferable?
No. The Plan is designed as a benefit only for NRG employees.
• What are the Tax Implications of buying/selling ESPP shares?
Since the NRG ESPP is considered a “qualified” plan by the IRS, you are not immediately liable for the 15%
difference between the discounted purchase price and the Fair Market Value (FMV) when the shares are
purchased. In the year ESPP shares are sold, the income recognized by US tax authorities will be reported on a
participant’s W-2. If ESPP shares are sold in a qualifying disposition, the lesser of the actual gain (FMV on sale
date less the actual purchase price) or the discount will be reported. If shares are sold in a disqualifying
disposition, income reported is equal to the spread between the purchase price and the FMV of the stock on the
purchase date, even if the stock is ultimately sold at a loss. Employees are responsible for notifying
[email protected] when ESPP shares are sold.
If you sell your shares within six months after the Holding Period, your sale will be considered a “disqualifying
disposition” by the IRS and may be taxed less favorably than if you wait an additional six months.
NRG recommends that you speak with a tax advisor before buying or selling any securities, including
participation in the ESPP.
• What is a Disqualifying Disposition?
This happens when you sell shares acquired via an ESPP within 2 years of the beginning of the Purchase Period
or within a year following the actual share purchase, whichever is longer; in the NRG ESPP, this equates to the
six month period following the close of the Holding Period (assuming continued employment with NRG).
The impact of this transaction will depend on your specific financial situation, as well as other
factors including the timing of your sale. NRG recommends that you speak with a tax advisor before
buying or selling any securities, including participation in the ESPP.
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The preceding information is only a summary of the provisions of the NRG Energy, Inc. Employee
Stock Purchase Plan (ESPP). In the event of any discrepancy between this summary and the
ESPP Plan Document, the Plan Document will prevail. Although the Company expects to
continue this program indefinitely, it reserves the right to amend, suspend or terminate the ESPP
at any time.
(May 2016)
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