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Do I forfeit my restricted stock if I leave the company before vesting?

Generally, if you leave the company before the vesting date of restricted stock or RSUs, you typically forfeit whatever stock has not vested. Exceptions can occur, depending on the terms of your employment agreement, or whether under your stock plan the reason for your termination (e.g. disability, retirement) accelerates vesting or lets it continue. If your restricted stock was granted with a graded vesting schedule, you keep the vested portion of the grant, but most commonly you forfeit the remainder.

In its 2013 Stock Plan Design Survey, the National Association of Stock Plan Professionals observed the following prevalent trends in termination treatment among the companies in its survey group.

Type of job termination Treatment (% of companies)
Termination for cause All unvested awards are forfeited (98%); treatment is at the board's discretion (1%)
Involuntary termination (not for cause) All unvested awards are forfeited (69%); some unvested awards are forfeited, and vesting accelerates for the remaining portion (12%)
Normal resignation All unvested awards are forfeited (96%)
Death No awards are forfeited, and vesting accelerates for unvested awards (53%); all unvested awards are forfeited (21%)
Disability No awards are forfeited, and vesting accelerates for unvested awards (44%); all unvested awards are forfeited (24%)
Normal retirement All unvested awards are forfeited (41%); no awards are forfeited, and vesting continues normally for unvested awards (16%)
Early retirement All unvested awards are forfeited (63%); no awards are forfeited, and vesting continues normally for unvested awards (11%)

If restricted stock is granted with cliff vesting, by which the shares vest on an "all or nothing" basis depending on length of employment or performance goals, you forfeit the entire grant if you leave before vesting. This means that even if the stock price goes up substantially from the time of grant, you do not realize the appreciated value of the stock if you leave before vesting can occur.

Alert: Become familiar with the details of your vesting schedule to prevent losing grants that would have vested if you had worked longer at your company. Check whether delaying your departure would allow a meaningful amount of your outstanding restricted stock/RSU grants to vest.

For the treatment of unvested stock options in this situation, see the related FAQ.


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