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Life Events: Disability

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NEW! Disability And Death: What Happens To Stock Options, Restricted Stock/RSUs, And ESPP Participation?This is premium content

myStockOptions Editorial Team
Disability and death are subjects that few people like to think about, but they are important topics for employees who have stock compensation. Every stock plan has provisions on the treatment of equity compensation in the case of these life events, so you and your family members should understand those plan features just in case they come into play. This article presents the common ways in which stock plans treat grants upon the disability or death of employees.

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What happens to my stock grants if I become temporarily disabled?

Under some stock plans, if you are temporarily disabled and your employment is not terminated, you...

What happens to my stock options if I become permanently disabled?This is premium content

If your disability is total and permanent, most option plans treat you as if you have terminated employment, and thus...

What would happen to my unvested restricted stock or RSUs if I were to die or become disabled before the vesting date?This is premium content

The treatment of unvested restricted stock and RSUs upon death or disability depends on the terms of your stock plan and the specifics of your grant agreement. In its 2013 Stock Plan Design Survey, the National Association of Stock Plan Professionals observed the following related practices among the companies in its survey group...

What would happen to my performance share grant if I were to lose my job, retire, become disabled, or die?This is premium content

The outcomes can vary and depend on your plan's design. If you leave your company to take another job before the end of the performance cycle, you usually lose all right to receive the grant. Surveys show that in these situations...

How is "permanent disability" usually defined?This is premium content

For NQSOs, no definition of disability is specified by law. Employers have great discretion here in drafting their plans. Many plans define disability...

When I am no longer with my company (e.g. because of job loss, disability, or death), do statutory deadlines dictate when I must exercise an ISO?This is premium content

Yes. Under the Internal Revenue Code, you must exercise an ISO within...

Are the disability rules the same for ISOs?This is premium content

Not necessarily. If a plan wants to allow optionholders more than three months (but not more than one year) to exercise an ISO after termination of employment...

Does income from stock options affect my payments under disability policies or pension plans?This is premium content

It may. Your payments are rooted in your pre-disability or pre-retirement earnings in some way. Courts have addressed this issue...

Does vesting continue while I am on a leave of absence or a sabbatical?This is premium content

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...

Does the reason for my leave of absence or sabbatical affect vesting?This is premium content

Yes, according to the terms of your stock grant and any flexibility given by your plan administrator. Usually you...

Does maternity leave stop my vesting?This is premium content

Companies either include maternity in their short-term disability policy (and suspend vesting, regardless of the reason for the short-term leave) or...

What are the most common periods after termination during which stock options can be exercised? Does the reason (e.g. disability, early retirement) matter?This is premium content

Usually, you will have time after you leave the company to exercise your options. However, some companies...

Do special rules determine when a leave of absence is a termination of employment for the purposes of ISOs?

For ISO purposes, a bona fide leave of absence greater than three months can constitute a termination of employment if...

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