You should know the answers to the following questions, which address specific provisions. Understanding the topics involved and the key stock plan documents will help you make the most of your stock appreciation rights (SARs) and prevent costly mistakes. On many topics, the content on this website on stock options also applies to SARs, including much of the content linked to from the questions below.
1. Are SARs and stock options the same in their core features? How do these grants compare to other types?
2. Is formal acceptance of the grant required? What happens if I don't accept the grant before exercise?
3. What is the vesting schedule?
4. How long is the term of the SARs?
5. What is the deadline for exercising the SARs to prevent the expiration of the grant?
6. What would happen to the SARs if I were to leave or lose my job, die, become disabled, or retire? What about a leave of absence or furlough? How do these events affect vesting and the expiration date of the SAR grant?
7. How do I exercise my SARs? Are they cash-settled or stock-settled?
8. After I exercise my SARs, in what account will the shares or cash proceeds appear?
9. How does the tax withholding work? What are the tax rates for SARs?
10. What would happen to vested SARs in a corporate acquisition or merger? What if my SARs have not yet vested when the corporate change in control happens?
In addition, you should understand the tax treatment of the SARs you have. You should also learn about the related W-2 reporting that stems from exercise and the tax return reporting. This website's Tax Center covers all tax topics involving stock compensation.
