myStockOptions.com Close this window
Do I forfeit my restricted stock if I leave the company before vesting?
Yes. You 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.
Example: You are granted 1,000 restricted shares of your company's stock with a four-year graded vesting schedule (25% vesting per year). You leave the company three years after grant. You forfeit 25% of your grant.

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.

In certain situations where you paid for the restricted stock, the company may choose to repurchase your shares. Any tax withholding will not be refunded, and the forfeit itself does not trigger any tax loss. The situation is similar if you made a Section 83(b) election (unavailable for RSUs) and paid taxes on the value at grant.

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.


The content is provided as an educational resource. myStockOptions.com shall not be liable for any errors or delays in the content, or any actions taken in reliance thereon.
Copyright © 2000-2014 myStockPlan.com, Inc. myStockOptions.com is a federally registered trademark.

Please do not copy or excerpt this information without the express permission of myStockOptions.com.
Contact editors@mystockoptions.com for licensing information.