on the basics of stock options.
You cannot cash in your stock options immediately. The options must first be vested, and you don't own them forever.
Get a sense of what you should, and should not, expect in the terms of your stock option grant. This survey of 300 companies looks at trends in vesting schedules, post-termination exercise rules, and other plan features.
FAQ Table of Contents:
Basics
Rules
Acceleration
Job Events
Advanced
Basics
A vesting schedule dictates when you may exercise your stock options or when the forfeiture restrictions lapse on restricted stock. A schedule is time-based if you must...
Unless you complete the required service period of work at your company or reach the performance target...
Graded vesting is more common than cliff vesting. According to surveys, the most common vesting schedule for these grants is...
Vesting schedules are either established in advance by the board of directors when it approves the...
Yes. Vesting schedules provide for either "cliff" vesting or "graded" vesting...
No, it is not required. Sometimes, a stock option plan will provide for a...
Yes, unless the vesting schedule is mandated by the...
Yes. Technology companies, particularly pre-IPO companies, often have...
If you are vested in your stock options and they are currently exercisable...
You could mistakenly let the options expire without exercising them. You do not have your vested options for life...
You have some decisions but fewer than you would with stock options, which prompt a decision about exercise timing and, if you hold the shares, require cash for the exercise and taxes. By contrast, restricted stock and restricted stock units...
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Rules
Federal law does not mandate a minimum period within which your options must vest. For private companies, the laws of certain states...
There's no requirement for which vested options you must exercise first. The decision of which options to exercise first is part of your...
Unlike in some benefit plans, service for time-vested option and restricted stock grants is rarely...
Not usually. An exception would occur if your...
Almost all grants to W-2 employees base vesting on...
No. You could lose them in any of the following ways...
Not unilaterally. Although no specific law exists on this question, courts have examined this situation and provided some guidance...
Generally, yes, assuming this termination is made for good-faith reasons, such as business downsizing. Most employees are "at will," which means...
This depends on the terms of your company's plan document and your grant agreement as well as on the reason for the absence. Some plans give you vesting credit for...
The impact is determined by your stock plan. Some plans have provisions on what happens to outstanding options upon an approved leave of absence...
Yes, according to the terms of your stock grant and any flexibility given by your plan administrator. Usually you...
Companies either include maternity in their short-term disability policy (and suspend vesting, regardless of the reason for the short-term leave) or...
Always check your stock-plan documents for any guidance on this type of situation...
Typically, your service to the subsidiary continues to count...
If your company does not own a controlling interest in the joint venture, this could be considered a termination of employment...
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Acceleration
Most likely, retirement will cause your company to do neither. Retirement is a type of termination of employment under your stock plan. Only a small minority of companies either let the stock options continue to...
Some companies accelerate the vesting schedule of restricted stock or RSUs if...
Stock-based performance plans have targets that, when reached by the end of the measurement period, trigger vesting or payout according to the structure of the plan. Various surveys show that the most common metrics are...
In these grants the exercise price is equal to the fair market price on the grant date, but the grant vests only when certain targets, such as...
Successful completion of venture financing is a typical performance goal for a startup company. A public company might...
Typically, stock option vesting is accelerated in some way in a change of control. Depending on your stock plan...
If a company makes a grant with a specific vesting schedule and the schedule is later shortened from its original terms, the accountants will usually...
You can try for this in your severance agreement. Companies occasionally do this for all employees in special situations. But...
Generally not, though you should check your stock plan and grant agreement, as some plans may do so, at least in special situations. In many instances...
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Job Events
Most employers do not adjust the vesting schedule. However, companies may feel that...
No law requires this. It is your obligation to know these details. Court cases show that...
While being rehired is great news, the bad news is that the unvested options were canceled or forfeited when you were laid off, regardless of the reason for termination. As for the vested options...
In its 2010 Domestic Stock Plan Design Survey, the National Association of Stock Plan Professionals (NASPP) found that the following treatments of options at termination are most common...
If your option was granted with a graded vesting schedule, you are allowed to exercise the vested portion of the option grant, but most commonly you forfeit the remainder...
Yes. Stock plans often have different provisions on post-termination exercise periods for vested options, on any acceleration of vesting, and on the treatment of...
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Advanced
It has become easier to sell call options on your vested employee stock options. This creates both an income-producing opportunity and a hedging strategy, if you are allowed to do this and you understand the risks...
The holding period to determine whether a capital gain is long-term or short-term starts on the...
The holding period to determine whether a dividend is "qualified" and taxed at the lower 15% rate starts on the date after the option is exercised and the stock is held...
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