2013 tax increases: impact on restricted stock
Can RSU payouts be delayed after vesting acceleration or at job termination?
Articles on restricted stock, RSUs, and performance shares
Research shows continued growth in restricted stock grants
Using Rule 10b5-1 trading plans to sell restricted stock at vesting
Modeling tools for restricted stock
CE course on restricted stock, RSUs, and performance shares


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This issue of our quarterly newsletter showcases some of our award-winning content on restricted stock, restricted stock units, and performance shares, along with related new content about the tax-rate increases that took effect in 2013. Below you will find FAQs, articles, and news items that give a taste of our expertise on this and every other topic in stock compensation. For much more, just click through to our main content section on restricted stock and RSUs and the related parts of the Tax Center. Thanks for reading!

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What's the impact of the 2013 tax increases on my restricted stock grants?

The tax laws that became effective in 2013 do not have any provisions that directly relate to restricted stock. However, increases in the rates on income tax, capital gains, and dividends, along with the additional Medicare tax on compensation income and the Medicare surtax, indirectly affect the value of grants. Most importantly, the income from these grants can push your yearly income over the thresholds for these higher taxes.

Three Key Income Thresholds That Affect Your Taxes

Tax threshold Tax impact
$450,000 joint/$400,000 single (taxable income) Income taxed at 39.6%
$450,000 joint/$400,000 single (taxable income) Capital gains and dividends taxed at 20%
$250,000 joint/$200,000 single (modified adjusted gross income) 3.8% Medicare surtax on investment income; additional 0.9% Medicare tax on compensation income

Unless you have restricted stock units or performance share units that allow the deferral of share delivery, you cannot control the timing of your vesting dates and therefore the recognition of income. Therefore, you will need to consider planning scenarios for the vesting of your restricted stock/RSUs. Whenever possible, you want to focus on two planning goals: (1) keeping your yearly income under the thresholds for higher tax rates and (2) recognizing income at a future time when you think your yearly income and tax rates may be lower.

Your exposure to the higher 20% capital gains tax rate, higher income tax rates, and/or the Medicare surtax can vary, depending on when the grant vests. For examples of scenarios and planning ideas to consider for minimizing taxes, see the full FAQ on

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Can an RSU payout be delayed after vesting acceleration or at job termination?

A delay in RSU payout can occur. This depends on the reason for the acceleration, whether you are ending your employment with the company, and your position in the company.

Under the rules of IRC Section 409A, after specified "key employees" end their service to the company, other than by death or disability, the company must delay nonqualified deferred compensation (NQDC) payouts for six months (see an FAQ on this topic at our sister website, This includes accelerated payouts resulting from a merger or acquisition or from the employee's retirement. The definition of key employee in IRC Section 416(i)(1)(A) includes officers whose annual compensation is greater than $165,000 in 2013, shareholders whose stake in the company is 5% or more, and owners with a stake of 1% or more who make over $150,000 per year. Many companies apply this six-month-delay rule to an RSU grant, even if the grant does not have a deferral feature, as RSUs are considered NQDC.

For more on this topic, see the full FAQ on

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Articles On Restricted Stock, RSUs, And Performance Shares

Below we list just some of the articles about restricted stock and RSUs in the award-winning content of, along with new articles on the 2013 tax-rate increases. Our extensive articles and FAQs on restricted stock and RSUs are also joined by a podcast, an interactive quiz, and a self-study course and exam for CFP and CEP continuing education credits. All of these are available with Premium or Pro Membership or through corporate licensing.

Restricted Stock 101: Five Essentials Of Restricted Stock & RSUs by Matt Simon
While restricted stock and RSUs are relatively straightforward, they have technical aspects you must understand to make the most of them. Learn the essential facts of restricted stock and RSUs, including basic concepts, vesting schedules, and tax treatment.

New Tax Act And Medicare Surtax: Impact On Stock Option And Restricted Stock Strategies by Alan B. Ungar
The American Taxpayer Relief Act and the Affordable Care Act introduced tax-rate increases you need to consider in deciding how to plan around income from restricted stock/RSU vesting. This article explains the changes in tax law and suggests strategies for minimizing the new taxes.

Tax Planning For Options, Restricted Stock, And ESPPs After 2013 Tax Law Changes: High-Income Taxpayers Impacted Most (Parts 1 and 2) by Tom Davison and William Whitaker
The beginning of 2013 brought notable shifts in tax rates for people at higher income levels. Part 1 surveys the important tax changes and considers their impact on planning. Part 2 looks at planning strategies involving capital gains rates and considers general ideas related to income-shifting.

Restricted Stock: Tax, Financial, Estate, And Retirement Planning (Parts 1 and 2) by Richard Friedman
Understand financial planning for restricted stock and RSUs. Part 1 discusses the growing popularity of these grants, their special features, and the related tax planning. Part 2 covers complex issues in financial, estate, and retirement planning.

Stockbrokers' Secrets (Part 8): What I Tell My Clients About Their Restricted Stock And Performance Shares by W.E.B. Bantling
For many employees, receiving restricted stock, restricted stock units, or performance shares adds a new layer of complexity to their equity compensation. This article presents six common questions the author hears from his clients.

Restricted Stock Units Made Simple (Part 1): Understanding The Core Concepts by Matt Simon
Restricted stock units (RSUs) have become the most popular alternative to stock options. While RSUs share many of the same issues as restricted stock, there are differences, and it is important to understand the basics of RSUs in their own right. This article is available free!

Decisions At Grant With Restricted Stock (Part 1): Tax Fundamentals by Tom Davison
When your company grants you restricted stock, it promises to let you keep a set number of shares on a particular date in the future. The stock becomes yours if you still work for the company on the vesting date. In the typical case, you do not pay for the shares. This article series presents what you need to know at grant and the decisions you can make.

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Research Shows Continued Growth In Restricted Stock Grants

Equilar is the leading firm for providing executive compensation data, and we look forward to its yearly broad report on equity-granting trends. For its 2013 Equity Trends Report, Equilar looked at various sources, including the financial statement footnotes of annual reports from companies in the S&P 1500, to examine patterns in stock-based compensation and gain insight into stock-granting practices from 2007 through 2012. Unlike the data in proxy statements and Section 16 (Form 4) disclosures, which focus on executives, the financial statement footnotes in an annual report detail all of the company's grants and therefore give a broader picture of its stock plans.

In the data from 2007–2012, Equilar observed a continuing shift away from stock options and toward restricted stock, RSUs, and performance shares. While the number of companies granting both types of equity compensation remained fairly stable, there were significant changes in the percentage of companies granting only stock options and only restricted stock over the six-year period.

Year Options only Restricted stock only Both Neither
2007 16.2% 17.8% 62.3% 3.7%
2008 13% 20.4% 64.3% 2.3%
2009 10.1% 22% 65% 2.9%
2010 7.8% 24.3% 65.4% 2.4%
2011 6.8% 28.3% 63% 2%
2012 5% 32.6% 60.2% 2.2%

Other findings by Equilar include the following:

  • The percentage of the S&P 1500 that granted options during the period of study fell from 78.5% in 2007 to 65.2% in 2012.
  • During the studied period, there was a sharp increase in the use of restricted stock (including RSUs). In 2007, 80.1% of the companies were granting restricted stock, and by 2012 this figure had risen to 92.8%. Over the six-year period, the median number of shares granted in these types of awards increased at an annual rate of 11.9%.
  • Among 477 companies that had filed their proxy statements by March 18, 2012, over half (61.8%) revealed that they had used some type of performance-based incentive in equity awards to CEOs during 2012.

For additional data on changing stock grant practices, see a related FAQ on

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Using Rule 10b5-1 Trading Plans To Sell Restricted Stock At Vesting

We have recommended the use of a Rule 10b5-1 trading plan if you often know important confidential information about your company and are thus at risk of being inconveniently blocked from stock transactions because of the rules against insider trading. A properly created prearranged 10b5-1 plan allows you to sell stock and can serve as an affirmative defense should any insider-trading charges arise.

If you are planning to use a 10b5-1 plan to sell your company stock at vesting, or to use some of the shares for the taxes on the income, bear in mind that 10b5-1 plans have become controversial and that best practices for them are still evolving. These plans seem to be under special scrutiny by the SEC and the Department of Justice, as notably reported by many recent articles in The Wall Street Journal (see, for example, Insider-Trading Probe Trains Lens On Boards). The regulatory searchlight on Rule 10b5-1 plans is also discussed in recent memos from some law firms, including Dechert and Pillsbury. These memos outline best practices, as does an FAQ on

Regardless of what companies voluntarily do in their own stock-trading policies for insiders, there is a growing sense that the SEC will release proposed rules or some type of guidelines on 10b5-1 plans. The Council of Institutional Investors continues to request that the SEC tighten up the rules. It submitted a letter in May with suggestions for amendments or SEC interpretive guidance. Future SEC rules may affect what you are planning to do when your restricted stock vests. For additional information on 10b5-1 plans, see the special section on them at

Nonqualified Deferred Compensation:, A Complete Online Resource For Participants And Professionals

Tax-rate increases and the new Medicare surtax have boosted the popularity of nonqualified deferred compensation. From the award-winning publishers of, features articles, FAQs, a glossary, podcasts, interactive quizzes, and a calculator, all to help you, your clients, or your executives understand and make the most of nonqualified deferred compensation.

  • Clear explanations of NQDC by experts
  • Financial planning, taxation, risks, job loss, and legal issues, along with core concepts
  • Appeals to plan participants, plan providers and administrators, financial advisors, attorneys, and companies with NQDC plans

For companies, education and communication are vital for ensuring NQDC plans work properly to motivate and retain vital executives, directors, and key employees. Companies can license our educational content and tools for websites, print materials, newsletters, and presentations.

For more information on, including its prestigious advisory board, see the About Us section of the website, and please contact us by phone (617-734-1979) or email (

Modeling Tools For Restricted Stock & RSUs

The various tools for financial and tax planning at can help you make smart decisions with your restricted stock or RSUs.

To learn more about all of the features in these award-winning online applications, see the myTools page at

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CE Course On Restricted Stock, RSUs, And Performance Shares

The Learning Center has courses of study and exams offering continuing-education credits for Certified Equity Professionals (CEPs) and Certified Financial Planners (CFPs). The course on restricted stock, RSUs, and performance shares features articles, FAQs, and a podcast from on all apsects of these grants. They are woven into a dynamic, interactive learning tool that teaches the topics in a memorable way. In the exam that follows the course, the answer key also links to relevant content on the site for further reading and learning.

Other courses offered through the Learning Center focus on nonqualified stock options, employee stock purchase plans, SEC law for stock compensation, and financial planning with equity awards. In total, the courses in the Learning Center can provide up to 20 continuing education credits for CEPs and 15 credits for CFPs.

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