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Test Your Knowledge: Job Loss Quiz
Whether expected or not, job loss is an upheaval that gives you a lot to think about. Do you know what would happen to your stock compensation? Test your knowledge of the impact job termination has on various types of equity awards. Please answer the following 11 questions. This quiz is also a course of study. The answer key links to content on the topic for follow-up reading.

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1. What usually happens to unvested stock grants upon job loss?
For W-2 employees, vesting continues normally, as mandated by ERISA
The vesting date is usually accelerated to the date of job termination
You forfeit any stock grants that have not vested by your termination date
You forfeit any stock grants that are more than 90 days from vesting at your termination date
 
 
2. Upon job loss, what happens to money that was deducted from your paycheck to buy shares in an employee stock purchase plan?
You keep shares already purchased, but you lose any deducted money that had not yet been used to purchase shares
You keep shares already purchased, but you get back any deducted money that had not yet been used to purchase shares
Shares purchased in the current offering are automatically cashed out, and the money is returned to you along with unused deductions
You lose any shares or deducted money in that ESPP offering period, but you can deduct the total amount on your tax return
 
 
3. Is the company legally required to inform you about vested but unexercised stock options when you lose your job?
No, though some companies do inform terminated employees about outstanding stock options
The company is not allowed to disclose this information to a terminated employee
Yes, the company must disclose this information to a terminated employee
Sometimes, depending on the laws in the state of incorporation
 
 
4. What usually happens to a performance share grant upon job loss?
You forfeit any unvested portion of the grant, unless the performance goal seems obtainable
You forfeit any unvested portion of the grant, even if the performance goal seems obtainable
You forfeit any unvested portion of the grant, and the company claws back any gains already realized
The performance share grant continues until the end of the performance period
 
 
5. How are taxes paid on option or restricted stock income after job termination?
The company withholds taxes from the income of former employees, just as it would for current employees, and it reports the income on Form W-2
This depends on the reason for termination and the terms of your company's stock plan
No taxes are withheld, and the income is reported on Form 1099-MISC, so you pay the taxes with your tax return
No taxes are withheld, though the income is still reported on Form W-2
 
 
6. What is the legally required window of time during which you can exercise stock options after termination?
At least 30 days
At least 90 days
You cannot exercise stock options after termination
There is no legal requirement: it depends on the stock plan provisions
 
 
7. If you lose your job but are later rehired, can forfeited stock grants be reinstated?
Yes, this is a common company practice for both unvested and vested options that were forfeited earlier
Only vested options that were forfeited can later be reinstated; you lose the unvested options
Forfeited stock grants cannot be reinstated upon rehiring; however, depending on the your company's plan, you may be able to keep the stock grants if you merely switch from employee to consultant status
Yes, but this is called backdating and can lead to legal problems for the company
 
 
8. If the term of your vested options will expire in 60 days but your company allows 90 days for option exercise after job loss, how much time do you have to exercise the options?
60 days, as the option term always overrides the post-termination exercise period
90 days, as the post-termination exercise period always overrides the option term
60 days for nonqualified stock options, but 90 days for incentive stock options
You cannot exercise vested stock options after your termination date
 
 
9. Does the reason for job loss affect the post-termination exercise period?
No, the company must offer the standard 90 days to all terminated employees, regardless of the reason for termination
Only for voluntary termination, such as a resignation, which usually results in forfeiture; involuntary termination always receives 90 days to exercise options
Only if you are fired for cause, which always results in forfeiture
This depends entirely on the terms of your company's stock plan
 
 
10. Does the reason for job loss affect the vesting of restricted stock and RSUs?
Possibly, as the company can accelerate or end vesting, depending on the reason for the job termination
No, vesting must always end on the termination date
No, vesting is always accelerated to occur on the termination date
Only in certain states whose laws permit changes to vesting schedules
 
 
11. How long do incentive stock options keep their special tax benefits after job termination?
60 days from the termination date
90 days from the termination date
One year from the termination date
Incentive stock options cannot lose their special tax treatment
 
 
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