What you must decide when your restricted stock/RSU grant is about to vest
Delaying restricted stock taxes at vesting
Surveys show restricted stock rivals (but doesn't yet equal) stock options
College funding and financial aid: impact of stock compensation
Course and podcast on SEC law & insider trading


Think Twice insider trading prevention DVDs: educate, entertain, and jolt your employees and executives (see the ad below) Developed for both participants and professionals, a complete online resource about nonqualified deferred compensation plans (see the ad below)

OPTRACK Stock Plan Administration Software: Administration, financial reporting, and FAS 123(R) valuation program (see the ad below)


While is our trusted brand name, we have so much engaging content on restricted stock, RSUs, and performance shares that we once considered starting a new site called (we own the URL). Plus, we have valuable tools and calculators for these grants, including our new Restricted Stock Comparison Modeling Tool, which helps you make decisions at vesting about whether to hold or sell the shares.

We appreciate your interest in If you do not yet subscribe to Premium or Pro Membership, giving full access to our content and tools, tax season is a great time to upgrade. All of our content and tools are also available for licensing.

See also the Blog, one of the best ways to stay on top of equity compensation news and the latest developments at our website. Additionally, you can follow us on Facebook and Twitter.

We'd love to hear from you by phone (617-734-1979) or by email ( with your comments or suggestions, whether on or on, our newest website, which is all about nonqualified deferred compensation. Thank you.

—Bruce Brumberg (Editor-in-Chief)

Featured FAQs On Restricted Stock & RSUs

My grant will vest soon. What do I need to decide?

You have a few decisions to make. However, the situation is not like that of stock options, where you must decide about exercise timing and also, if you plan to hold all the shares, how to come up with cash for the exercise price and taxes. By contrast, restricted stock and restricted stock units do not require all these decisions when vesting approaches. You may have needed to formally accept the grant to obtain it, though that procedure is not as common as it is with stock options.

Open A Brokerage Account

Before the vesting date, you will have to open an account with the brokerage firm or transfer agent that your company designates. At vesting or share delivery, the shares are then electronically deposited into your account from the transfer agent.

The setup needed for this account may be all online, or you may need to send a paper document with your signature to the firm. At some brokers, your company may be able to establish an account for each plan participant, and then you merely need to accept yours.

Alert: It is important that you open an account, as your company may have a policy of not delivering shares unless you have done so.

Tax Decisions

You will owe taxes on the value of the shares at vesting, when the shares are delivered into your account. At least for federal tax purposes, the withholding is required to be at the rate for supplemental wages (usually 25%, though it is 35% for amounts above $1 million during a calendar year). In addition, there will be Social Security tax up to the yearly maximum, along with Medicare (plus any state and/or local taxes on this type of income).

Alert: If this rate is insufficient to cover the tax imposed by your federal and state marginal tax rates, you may need to pay estimated taxes.

You will need to decide how you will provide the taxes that must be withheld. The choices may include using cash, selling enough shares to cover the taxes (a sell-to-cover), or share withholding (i.e. some of the shares are held back for the taxes). Your company may have a mandatory withholding method, in which case you don't have to make a decision, or it may have a default that it will use if you do not elect your withholding method by the deadline.

The decision about whether to sell or gift the shares, transfer them to another account, or change to joint ownership revolves around your personal financial-planning situation, goals, and cash. The articles and FAQs of the section Financial Planning and Restricted Stock: Advanced on can give you some ideas about this.

Insider Trading Prevention And Education:
Think Twice DVD And Intranet Series
Request free previews at the Think Twice website

With insider-trading cases in the news, now is a good time for focusing on your compliance program and on education to prevent insider trading. The dramatic Think Twice series will teach, entertain, and jolt your employees and executives about insider trading and securities fraud. Used by over 1,000 companies and developed with input from the SEC Enforcement Division, these powerful and memorable story-lines will drive home key points on:

  • what insider trading is
  • the penalties and consequences
  • how the SEC discovers illegal activity
  • what happens if illegal tipping or trading is suspected
  • how SEC investigations are conducted

For more information on the Think Twice series, and a free white paper on insider trading prevention and education, see the Think Twice website. Qualified corporate buyers, including new IPO companies, can request free previews. Intranet licensing is available.

Can I delay the taxes at vesting with restricted stock when a sale would violate the securities laws or my company's blackout period?

In the standard tax treatment of restricted stock/RSUs, you owe taxes on the date of vesting, when shares are delivered. That is also the date used to calculate the value of the shares and the taxes owed.

But what happens if you cannot sell shares to pay the taxes on this stock-based income? Your company may impose a blackout on trading its stock. There may be a lockup, or perhaps the shares temporarily cannot be resold because of other securities law restrictions, such as insider trading prevention or the Section 16 short-swing profit rule. Maybe the shares are not registered with the SEC, or perhaps they are subject to a noncompete clause or a clawback. It would appear unfair to have to pay taxes on stock income received through vesting (or option exercise) if you could not sell the underlying shares at all, even just to pay the taxes.

As unfair as it seems, this is the reality presented by the US tax code, the IRS, and numerous court decisions. Taxation on the stock-based income can be delayed only by a true risk of forfeiture in the grant. In Strom v. United States (2011), the 9th Circuit Court of Appeals recently reinforced the difficulty faced by challenges to this rule. Earlier, the federal district court had supported the plaintiff's arguments that the date for the tax calculation should be delayed if a sale at exercise would trigger penalties under Section 16, but the circuit court rejected this position. The court's reasoning also applies to restricted stock and performance shares.

The only way to delay taxes with these grants is with RSU plans that have a feature allowing deferral of share delivery. This lets you decide when to receive the shares after vesting and thus lets you delay the ordinary income tax until the time of share delivery. These deferral plans must carefully follow the rules of IRC Section 409A on nonqualified deferred compensation. Other tax-planning ideas with restricted stock revolve around the question of whether to make the Section 83(b) election at grant (not available for RSUs).

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Restricted Stock Continues To Rival Stock Options In Popularity

As we reported in the survey data covered by our prior newsletter, the use of restricted stock has grown substantially. In a recent survey of its corporate clients, the Ayco Company found that while stock options (including SARs) remain the most popular type of award, restricted stock/RSUs continue to catch up. Below is a table that shows the different types of awards granted by its survey group:

Type of award % of companies granting
Stock options or SARs 84%
Time-vesting restricted stock or RSUs 64%
Performance shares 36%
Performance cash units 24%
Performance-vesting restricted stock or RSUs 24%

The 2010 Domestic Stock Plan Design Survey by the NASPP also showed that stock options maintain only a slight lead. The NASPP found that nonqualified stock options (NQSOs) remain the most common long-term incentive used by companies: 91% of the companies grant NQSOs to executives and 83% to middle management. Time-vested full-value awards are used by 89% of the companies for executives and by 85% for middle management.

For more on trends in equity comp, see our FAQs with corporate examples and survey data on option and restricted stock/RSU grants and on ESPPs.

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

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 (

College Funding And Financial Aid With Stock Grants

The price of higher education has never been, well, higher. Some private colleges now cost up to $60,000 per year; even at state universities, annual tuition can approach $30,000 for students who aren't state residents. This means smart financial and tax planning for college funding has become more important than ever. However, surprisingly little has been written about paying for college expenses through the use of stock grants and nonqualified deferred compensation (NQDC).

For the millions of US employees who have stock grants or NQDC from their companies, expert guidance on college funding is available in articles written by Troy Onink, a noted college-funding authority and Forbes blogger. Tailored for each website, his article series at and explain the issues and planning involved in using these forms of compensation to meet the costs of university tuition.

On, the three-part series Funding Your Child's College Education With Stock Options And Other Stock Grants explains:

  • the impact of equity awards on financial aid eligibility
  • the basics of gift tax and the tax treatment of stock compensation in the financial planning for higher education
  • methods to minimize capital gains at sale, planning for the kiddie tax and education tax credits, and strategies that students can use

With restricted stock (or any stock you own) you have the ability to get up to $1,900 tax-free for college or other expenses regardless of your tax bracket, as Part 3 of Troy's article series explains. If you have nonqualified deferred compensation and children approaching college age, you will want to read a similar series in the Life Events section on

OPTRACK Builds Knowledge Center Into Its Web Portals For Participants And Professionals

SyncBASE, Inc., the provider of OPTRACK, a leader in stock-based compensation plan accounting and administration software, has teamed with to establish a strategic partnership that helps companies and participants with their stock plan education and communications.

OPTRACK's 1,000+ corporate clients can build in a platform that allows users to access the award-winning Knowledge Center of OPTRACK clients will be able to strengthen their stock plan education and stay current on equity compensation developments without leaving the OPTRACK application platform.

"At a click of a mouse, OPTRACK clients have full access to unbiased articles, FAQs, podcasts, tax guides for over 30 countries, glossary, quizzes, and interactive tools that help participants understand their stock grants, make smarter decisions, maximize gains, and plan better," says Ramy Taraboulsi, CEO of SyncBASE.

For more information, see the OPTRACK website, or contact Lilian Hanna at SyncBASE (, (647) 284-2244).

New Course & Podcast On SEC Law & Insider Trading

More than two decades after the famous insider-trading convictions of Michael Milken and Ivan Boesky, insider trading has once again been splashed across the headlines over the past several years. Numerous cases, some involving bizarre schemes (and even a celebrity), have brought public attention back to the issue of illegal stock-trading on secret market-moving information about companies. This fascination recently culminated in the media frenzy over the trial and conviction of hedge-fund billionaire Raj Rajaratnam. Of great interest to many observers was not so much Mr. Rajaratnam's alleged crimes but his giant global web of informants, including consultants in the so-called expert networks that hedge funds call upon to gather information about trends in particular industries. In a Businessweek article pondering the implications of the Rajaratnam case for the future, the journalists note:

"In Boesky's day, Wall Street was a smaller, more insular world, and inside information flowed among a tighter circle of people...By the time the government's latest case came to light with Rajaratnam's arrest in October 2009, insider trading had moved well beyond the world of merger deals and investment bankers. The cast of characters is diverse—lower-level employees, both male and female."

To help financial professionals, stock plan participants, and investors stay out of trouble with the SEC and criminal prosecutors, has developed a new course, exam, and podcast on SEC law. These materials are based on the extensive articles and FAQs in the SEC Law section of Covered topics include SEC law basics, insider trading and tipping, Rule 10b5-1 plans, the requirements under Rule 144, and the Section 16 rules. The course and podcast complement the popular Think Twice DVD series for insider trading prevention, education, and compliance that the staff of helped to develop.

While the course and exam cover several topics in SEC law, the podcast focuses mainly on insider trading. In an entertaining audio presentation, realistic hypothetical situations involving insider trading are discussed to explain the key misunderstandings about confidential information and stock trading that can get people into trouble with the SEC (even if they don't mean to break the rules).

The new course and exam on SEC law for stock plans offers 5 credits for CEPs and 3 credits for CFPs. In addition, other courses and exams in the Learning Center cover nonqualified stock options, restricted stock and RSUs, employee stock purchase plans, and financial planning for stock compensation. A link to each is available on the Learning Center page and on the home page of

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