Restricted Stock & RSUs: myStockOptions.com Newsletter No. 64 (June 2016)
|IN THIS ISSUE|
The top 10 questions to ask about your grant of restricted stock or RSUs
At vesting, should you sell the shares immediately or hold them?
Articles, videos, and podcasts on restricted stock, RSUs, and performance shares
Global trends in the use of stock grants by multinational companies
Broad-based stock grants and employee ownership are expanding
Financial-planning tools for restricted stock and RSUs
CE course on restricted stock, RSUs, and performance shares
SPONSORS OF THIS ISSUE
- EATON VANCE INVESTMENT MANAGERS: Goals-based solutions for optimizing wealth with company stock (see the ad below)
- THINK TWICE training videos for insider-trading prevention: Educate, entertain, and scare your employees and executives into compliance (see the ad below)
- myNQDC.com: Developed for both participants and professionals, a complete online resource about nonqualified deferred compensation plans (see the ad below)
This issue of our quarterly newsletter showcases some of our award-winning content on restricted stock, restricted stock units, and performance shares. Below you will find information about FAQs, articles, podcasts, and videos that give a taste of our expertise on this and every other topic in stock compensation. For much more, 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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This week marks 16 years since we launched myStockOptions.com. Thank you for using our website and for your support and feedback over the years. We continue to enjoy helping grant recipients and their companies get more value from stock plans.
We hope you enjoy your summer!
—Bruce Brumberg (Editor-in-Chief)
|FAQ: What are the top 10 questions I should ask about my grant of restricted stock or RSUs?|
You should know the answers to the following questions. Understanding the topics involved will help you make the most of your restricted stock/RSU grant and prevent costly mistakes.
2. Is formal acceptance of the grant required? What happens if I don't accept the grant before vesting?
3. What is the vesting schedule?
6. When the shares vest, what account will they appear in?
7. How does the tax withholding work?
8. With RSUs, can I defer the delivery of the shares at vesting?
10. What would happen to my restricted stock in a corporate acquisition or merger?
In addition, you should understand the tax treatment, the reporting on your Form W-2 (whether for restricted stock or RSUs), and the related tax return reporting. This website's Tax Center covers all tax topics involving stock compensation.
|FAQ: My restricted stock units will vest soon. Should I sell the shares at vesting or hold them?|
When restricted stock, restricted stock units, or performance shares vest, whether you sell or hold the shares depends on various factors. Some of these factors, especially personal ones, are under your control, while others stem from your company's plan or the tax rules.
- Taxes. Shares can be a source of the proceeds needed to pay taxes at vesting. Proceeds for tax withholding can come from net share settlement or a sale of shares.
- Tax planning. Whether you hold the shares and for how long will affect your capital gains tax at sale. Any holding period after vesting does not affect the amount of income tax due for the value of the shares at vesting.
- Your cash needs, upcoming life events, and other financial-planning factors, including diversification, dividends paid on your stock, and alternative investments.
- Whether your company is publicly traded or privately held. At public companies, be aware of blackouts when you can't trade or stock ownership/retention guidelines that require you to keep a certain amount of company stock. In a privately held company, you will not be able to sell the shares immediately at vesting because of restrictions that are likely to exist in your grant and/or because of the SEC rules on resales.
Calculations in the Restricted Stock & RSUs Comparison Modeling Tool on myStockOptions.com can help you decide. If you are not comfortable with making these decisions on your own, discuss strategies with a financial advisor. This is particularly useful if you are thinking about holding the stock at vesting and company shares represent at least 10% of your net worth.
Alert: You should confirm that you have certified an IRS Form W-9 or Form W-8BEN for the account with your brokerage firm or transfer agent. If it does not have this form, you will be subject to backup withholding on the sales proceeds.
|Articles, Podcasts, And Videos On Restricted Stock, RSUs, And Performance Shares|
Below we list selected articles, videos, and podcasts about restricted stock and RSUs in the award-winning content of myStockOptions.com. The extensive section on restricted stock and RSUs at myStockOptions.com is complemented by an interactive quiz and a self-study course and exam for CFP and CEP continuing-education credits. All of this content is available with Premium or Pro Membership or through corporate licensing.
NEW! Ten Financial-Planning Rules You Should Know About Restricted Stock And RSUs by the myStockOptions Editorial Team
While grants of restricted stock and RSUs are conceptually simple, financial planning for them can be complex. This article presents the essential financial-planning points that you should consider before your restricted stock or RSU grant vests.
Restricted Stock Units Made Simple (Part 1): Understanding The Core Concepts by the myStockOptions Editorial Team
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!
Restricted Stock Units Made Simple (Part 2): Taxation by the myStockOptions Editorial Team
The taxation of RSUs generally resembles that of restricted stock but carries some important differences, as this article explains.
Restricted Stock 101: Five Essentials Of Restricted Stock & RSUs by the myStockOptions Editorial Team
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.
Why You'll Learn To Like Restricted Stock Grants by Richard Friedman
Podcast included! Your company may no longer be using stock options. Instead, it may be granting restricted stock, restricted stock units, or performance shares. While these grants don't carry the same upside as stock options, they have benefits you will surely appreciate once you understand their special features.
Restricted Stock: Tax, Financial, Estate, And Retirement Planning (Parts 1 and 2) by Richard Friedman
Podcast included! 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.
Restricted Stock Versus Stock Options: Making A Rational Choice by Alan B. Ungar
In a growing trend, your company may let you choose between stock options and restricted stock. Which is better for you? Learn techniques to analyze your financial situation and goals so that you can make the right choice. Part 1 compares and contrasts the basic traits of restricted stock and stock options. Part 2 provides a method of analysis to help your decision-making.
Stockbrokers' Secrets: 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.
Performance Shares by Bruce Brumberg
Many companies now make stock grants that base your gains on more than just your continued employment or an increase in stock price. As companies take a "portfolio approach" to stock compensation, you may be granted performance shares, which you receive only upon the achievement of specified goals. Part 1 explains the basics of performance share grants. Part 2 explores their structure in depth, along with the concept of expiration and the impact of job termination. Part 3 explains the taxation of performance share grants and then goes on to discuss the special tax considerations that arise in corporate mergers and acquisitions.
Decisions At Grant With Restricted Stock 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. Part 1 presents what you need to know at grant and the decisions you can make. Part 2 discusses the risks of the Section 83(b) election. Part 3 explains ways to analyze your alternatives.
Decisions At Vesting With Restricted Stock by Tom Davison
Vesting is another crucial time for making decisions about your restricted stock. Part 1 explores what tax-withholding method to use, whether you should hold or sell the stock, and what account to keep the shares or cash in after vesting. Part 2 looks at key vesting decisions.
Restricted Stock & RSUs (Part 1): Key Aspects To Know
Running time: 4:37. This engaging video series presents the fundamentals of restricted stock, restricted stock units (RSUs), and performance shares to help you make the most of these grants. Part 1 covers key concepts, such as vesting schedules and understanding your grant's value.
Restricted Stock & RSUs (Part 2): Taxes And Related Key Decisions
Running time: 3:57. Part 2 of this video series presents the basic tax treatment of restricted stock and restricted stock units (RSUs), including the tax rates, the timing of taxation, and withholding.
Basics Of Restricted Stock And Restricted Stock Units
Running time: 8:05. In this audio interview, the editor-in-chief of myStockOptions.com explains how restricted stock and RSUs work, including grant, vesting, sale, and taxation.
Why Restricted Stock And RSUs Are A Good Deal
Running time: 11:37. Compensation expert Richard Friedman explains what makes restricted stock and restricted stock units valuable equity awards. This interview is a companion to Mr. Friedman's article on this topic in the Restricted Stock section of the website, where he also has articles on financial and tax planning for restricted stock and RSUs.
Insider Trading Prevention And Education:
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|New Survey Shows Worldwide Patterns In The Use Of Equity Comp, Including Restricted Stock And RSUs|
Global Equity Insights 2016 is a survey of 148 multinational corporations undertaken by a consortium of companies and professional associations, including Baker & McKenzie, Computershare, Fidelity, Global Equity Organization, and Siemens. In its findings on equity types, the survey shows that grants of restricted stock units (RSUs) and performance shares are prevalent among large multinational companies, though stock options continue to be granted as well.
|Equity type||All companies||Europe||North America||Rest of world|
|Restricted stock units||29%||22%||33%||29%|
|Stock appreciation rights||5%||5%||4%||9%|
In grants of performance shares, the following metrics are used by the surveyed companies:
|Performance measure||All companies||Europe||North America||Rest of world|
|Total shareholder return||24%||25%||25%||18%|
|Earnings per share||15%||14%||16%||18%|
|Return on capital||8%||7%||8%||11%|
|Economic or cash value added||1%||3%||0%||0%|
|Return on sales||1%||2%||1%||0%|
|Other financial measures||7%||8%||6%||4%|
|Other nonfinancial measures||7%||5%||9%||11%|
|Broad-Based Stock Grants And Employee Ownership: A New Corporate Trend?|
We like it when companies make broad-based grants of equity awards to all of their employees. These moves show that stock compensation and share ownership are not just for executives and directors but are also practical, commonsense ways in which companies can reward rank-and-file employees above and beyond salary and encourage a commitment to workplace excellence through a culture of employee ownership. From an economic perspective, the wealth that middle-class employees can create through grants of stock options and restricted stock/RSUs has the potential to reduce income inequality.
Unfortunately, many employees and managers saw a significant reduction in their equity compensation after stock option expensing became mandatory during the last decade. This is why we are especially pleased by the new generation of broad-based grants that we have observed. In perhaps the most famous example, last year Apple declared its intention to issue RSUs to all of its employees, as reported by an article at the tech-news website 9to5. Other well-known companies, including Starbucks, are also committed to making broad-based grants of RSUs.
Now Chobani, a popular yogurt-maker, has announced that all 2,000 of its employees will receive shares worth 10% of the company when Chobani eventually goes public or is sold. This move was both reported and praised by several high-profile media outlets, including The New York Times and NPR. The Times estimates that if Chobani were to be valued at $3 billion in an IPO or acquisition, the average employee stake in the company could be worth $150,000—and some long-tenured employees could have stock worth more than $1 million.
Chobani's gesture is very good news to Professor Joseph Blasi of Rutgers University. A long-time advocate of employee ownership, he has extensively researched this topic and recently co-authored a book called The Citizen's Share: Reducing Inequality in the 21st Century. In an article for The Huffington Post, he states that Chobani's push to award equity for all workers may be part of a new trend in employee ownership. "When you taste that next teaspoon of Chobani," he writes, "you may be tasting a new corporate ideology of shared capitalism, inclusive prosperity, and profit sharing." As he puts it, this broad-based grant is "a promise that any future Chobani shareholders will not simply be those who play the stock exchanges but will also include those workers who help create the broad wealth that stock markets are supposed to be all about." He then asks whether "middle class capital shares" of this type are a possible alternative to tax redistribution that could help to counteract the recent stagnation of wages among the middle class in the United States.
|Financial-Planning Tools For Restricted Stock And RSUs|
Easy to use and secure, the tools for financial and tax planning at myStockOptions.com can help you make smart decisions with your restricted stock or RSUs.
- Track your grants in the myRecords portfolio-tracker and get email alerts about imminent vesting dates.
- Perform "what if" modeling with your stock price and tax rates in the Quick-Take Calculator for Restricted Stock.
- In the I Need The Money Tool, you can set a cash goal for your grants and then determine whether you can reach it now or in the future.
- The Restricted Stock Comparison Modeling Tool can help you decide whether to hold or sell the shares after vesting. The tool (similar to our patented modeling tool for stock options) lets you explore whether you may be better off holding the shares or selling them for an alternative investment.
To learn more about all of the features in these award-winning online applications, see the myTools page at myStockOptions.com.
Nonqualified Deferred Compensation: myNQDC.com, A Complete Online Resource For Participants And Professionals
Tax increases and the Medicare surtax on investment income have boosted the popularity of nonqualified deferred compensation. From the award-winning publishers of myStockOptions.com, myNQDC.com features articles, FAQs, a glossary, podcasts, interactive quizzes, and a calculator. Our goal is to help you, your clients, or your executives understand and make the most of nonqualified deferred compensation.
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 myNQDC.com, including its prestigious advisory board, see the About Us section of the website, and please contact us by phone (617-734-1979) or email (firstname.lastname@example.org).
|Need CE Credits? Learning Centers At myStockOptions.com And myNQDC.com Offer Credits For CEPs, CFPs, And Other Professionals|
myStockOptions.com and its sibling website myNQDC.com have online self-study courses and exams offering continuing-education credits that can be used to meet the CE requirements of a few different professional designations. At myStockOptions.com, the Learning Center offers up to 25 credits for for Certified Equity Professionals (CEPs) and up to 15 credits for Certified Financial Planners (CFPs). In addition to providing CE credits, our courses and exams can also serve as internal certification programs for professionals at companies and brokerage firms who work with stock compensation.
Each course of study features podcasts, videos, articles, and FAQs from myStockOptions.com. They are woven into a dynamic, interactive learning tool that teaches the topics in a memorable way. The answer key for each exam also links to relevant content on the site for further reading and learning. The course and exam on restricted stock, RSUs, and performance shares covers all of the key information that you must know to be well informed about these grants.
Built on a similar model, the the myNQDC.com Learning Center on nonqualified deferred compensation offers up to 6 continuing-education credits for Certified Financial Planners, 6 Professional Achievement in Continuing Education (PACE) credit hours for CLU® and ChFC® certifications, and up to 12 CPE hours for credentialed ASPPA members.
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