Fidelity.com Help - Fidelity.com Help (2024)

A restricted stock unit (RSU) is a form of equity compensation used in stock compensation programs. An RSU is a grant valued in terms of company stock, but company stock is not issued at the time of the grant. After the recipient of a unit satisfies the vesting requirement, the company distributes shares or the cash equivalent of the number of shares used to value the unit. Depending on plan rules, the participant or donor may be allowed to choose whether to settle in stock or cash.

Restricted Stock Unit Basics

• What is a restricted stock unit?
• How is a restricted stock unit different from a restricted stock award?
• How is a restricted stock unit different from control and restricted stock?
• How do restricted stock unit plans work?
• What happens to my restricted stock units if I retire, die, or become disabled?

Vesting & Distribution

• When do RSUs vest?
• What is a distribution schedule?
• What happens to my restricted stock units once they vest?
• What happens to my restricted stock units once they vest if I elect to defer receipt of my grant?
• What happens to my restricted stock units if I leave my employer prior to my vesting date?

Summary and History Information

• What kind of summary information can I view for restricted stock units?
• What kind of detail can I view on particular RSUs?
• How is the total value of unvested grants calculated?
• What is the fair market value for RSUs?
• What is the expiration date?
• How do I view my plan document and grant agreement?
• What kind of history information can I view for RSUs?
• What kind of information can I view for unvested grants?

Accepting and Declining Grants

• How do I accept or decline a grant?

Tax Implications

• What are the income tax implications of an RSU?
• How do I pay taxes on restricted stock units?
• How is tax withholding calculated?
• How can I determine how much will be withheld for taxes upon vesting?

Related Help Topics

RESTRICTED STOCK UNIT BASICS

What is a restricted stock unit?

A restricted stock unit is a grant valued in terms of company stock, but company stock is not issued at the time of the grant. After the recipient of a unit satisfies the vesting requirement, the company distributes shares or the cash equivalent of the number of shares used to value the unit. If the plan rules allow it, the company may require or the recipient may choose to defer distribution to a later date. Vesting requirements may be met by the passage of time or by either company or individual performance. If the recipient does not meet the requirements the company set forth prior to the end of the vesting period, the units are typically forfeited to the company. Depending on plan rules, the participant or donor may be allowed to choose whether to settle in stock or cash.

HHow is a restricted stock unit different from a restricted stock award?

Like a restricted stock award (RSA), a restricted stock unit (RSU) is a grant valued in terms of company stock. Unlike an RSA, no company stock is issued at the time of an RSU grant. After a grant recipient satisfies the vesting requirement, the company distributes shares or the cash equivalent of the number of shares used to value the unit. If the plan rules allow it, the company may require or the recipient may choose to defer distribution to a later date. Vesting periods can be met by the passage of time, or by company or individual performance. If the recipient does not meet the conditions the company set forth prior to the end of the vesting period, the units are typically forfeited.

How is a restricted stock unit different from control and restricted stock?

Restricted stock awards and control and restricted stock are two entirely different concepts. Restricted stock awards relate to equity compensation, and control and restricted stock to securities law. A restricted stock award is a form of equity compensation subject to a an agreement (the grant agreement) defining the recipient's rights under the issuer's equity compensation plan. Control and restricted stock involves unregistered shares of stock that are restricted by SEC Rule 144.

How do restricted stock unit plans work?

In a restricted stock unit plan, your company offers you an economic interest measured by your company's stock, and makes payment to you at a future date or event specified in your own grant agreement and company plan. Under most plans, you will have to decide whether to accept or reject the grant. If you accept, you may be required to pay your employer a purchase price for the grant. Assuming that your grant vests under the vesting rules that apply to you, you will receive shares of company stock or the cash equivalent (depending on your company's plan rules) when you reach the distribution date specified in your plan and grant agreement. You may forfeit your economic interest in the plan if you leave the company prior to the vesting date.

What happens to my restricted stock units if I retire, die, or become disabled?

If your restricted stock units are vested, payment will be made to you or your estate as set forth under plan rules. With respect to unvested restricted stock units, there are usually special rules in the event you retire, die or become disabled. See your employer's plan rules for details.

VESTING & DISTRIBUTION

When do RSUs vest?

Depending on your company's plan rules, vesting requirements may be met by the passage of time, or by company or individual performance. If you do not meet the requirements set forth by your company prior to the end of the vesting period, your units are typically forfeited to the company. Vesting may occur prior to the vesting date shown, contingent upon your company's satisfaction with your compliance with the company's performance criteria set forth in your company's plan rules.

What is a distribution schedule?

A distribution schedule is the schedule for actual payment to you under your company's plan.

What happens to my restricted stock units once they vest?

Once your restricted stock units vest, your rights become non-forfeitable. You will receive actual payment according to the distribution schedule under your company's plan. If you have not elected to defer distribution, the distribution date and the vesting date are the same.

What happens to my restricted stock units if I elect to defer receipt of my grant?

Once the holding period has been met, the shares or cash equivalent (depending on plan rules) of company stock continue to be held as units, and are not automatically deposited into your Fidelity Account. Once the shares have vested, you may be required to pay statutory minimum taxes, but since you've deferred receipt of payment to a later date, you can put off paying your remaining taxes. You will not own the shares outright until they are distributed to your Fidelity Account, based on your plan's distribution terms.

What happens to my restricted stock units if I leave my employer prior to my vesting date?

If you leave your employer prior to the date your restricted stock units vest, typically you forfeit your units. Check your company's plan for details.

SUMMARY AND HISTORY INFORMATION

What kind of summary information can I view for restricted stock units?

The Summary page for restricted stock units displays information about grant totals, unaccepted grants, and accepted grants. From this page, you can view detailed information about a particular RSU, view your vesting and distribution schedules, accept or decline unaccepted RSUs, or select a tax withholding method which will take effect at vesting or distribution for an accepted RSU.

What kind of detail can I view on particular RSAs?

You can view vesting schedule information, grant details, and the grant's current estimated value.

How is the total value of unvested grants calculated?

The total value of unvested grants is equal to the previous day's closing price of the stock times the number of unvested grants, but not including unaccepted grants. Note that this value is not the same as the fair market value for federal income tax purposes of your unvested grants.

What is the fair market value for RSUs?

The fair market value for federal income tax purposes is the value of the units at the time they vest and the proceeds are delivered to you. Fair market value is specified in your RSU agreement, and is used to determine the amount of income treated as compensation for federal income tax purposes. Your company's RSU plan rules determine the how fair market value is calculated for your RSUs. The calculation may be based on prior business day's close, average high and low for the day, real-time price, or today's close. Fair market value per share is the fair market value for federal income tax purposes divided by the number of RSUs you own.

What is the expiration date?

The expiration date is the date on which your RSU agreement expires. For restricted stock that vests based on time, the expiration date is immaterial. If vesting is based on factors other than the simple passage of time, such as performance measures, the expiration date is the end of the period within which vesting is possible. For these plans, if vesting has not occurred by the expiration date, the grant is forfeited. Please refer to your company's plan rules to understand whether any expiration dates will apply under your plan.

How do I view my plan document and grant agreement?

For accepted grants, select View Details. On the View Details page, click View Plan Document or View Grant Agreement. You can also view your plan document and grant agreement when you accept or decline an unaccepted grant.

The plan document and grant agreement are in PDF format. You must have the free Acrobat® Reader® to view and print the plan document.

What kind of history information can I view for RSUs?

You can view a history of all transactions for your restricted stock units plan for the past 10, 30, 60, 90, or 120 days. Transactions appear in reverse chronological order, but you can also sort the list of transactions by transaction type, grant ID, grant date, or quantity. You can view details pertaining to accepted and declined grants.

For transactions older than 120 days, view Statements/Records under Accounts & Trade > Portfolio on Fidelity.com.

What kind of information can I view for unvested grants?

On the Unvested Grants page, you can view the vesting date, grant date, grant ID, number of units, and tax withholding method for each unvested grant. You can also view a grant's estimated value upon vesting, and an estimate of the taxes you may owe upon vesting.

The View Details page for an unvested grant also shows you the estimated fair market value per share, total estimated taxable income, and tax withholding amounts and percentages broken out by Federal, State, and Medicare.

ACCEPTING AND DECLINING GRANTS

How do I accept or decline a grant?

See Accepting and Declining Grants for details.

TAX IMPLICATIONS

What are the income tax implications of an RSU?

Under normal federal income tax rules, an employee receiving restricted stock units is not taxed at the time of the grant. Instead, the employee is taxed at vesting, when the restrictions lapse, unless the plan allows for the employee to defer receipt of the cash or shares. In these circ*mstances, the employer has certain withholding obligations which may or may njot cover the entire tax liabiliity for the employee at vesting or distribution. Payment of all other taxes can be deferred until the time of distribution, when the employee actually takes receipt of the shares or cash equivalent (depending on the company's plan rules). The amount of income subject to tax is the difference between the fair market value of the grant at the time of vesting, minus the amount paid for the grant, if any.

For grants that pay in actual shares, the employee's tax holding period begins at the time of distribution (which may or may not coincide with vesting depending on the plan rules), and the employee's tax basis is equal to the amount paid for the stock plus the amount included as ordinary compensation income. Upon a later sale of the shares, assuming the employee holds the shares as a capital asset, the employee would recognize capital gain income or loss; whether such capital gain would be short- or long-term depends on the time between the beginning of the holding period at vesting and the date of the subsequent sale. Consult your tax adviser regarding the income tax consequences to you.

How do I pay taxes on restricted stock units?

Depending on plan rules, you have three options to meet your tax withholding obligation due at vesting:

• Net shares
  If you elect to net shares, the appropriate number of shares are withheld at vesting to cover the tax withholding obligation. You retain the number of shares vested less the number of shares withheld for tax purposes.
• Pay cash
  If you elect to pay cash to satisfy your tax withholding obligation, you must have the appropriate amount of cash in your account on the day of vesting. The money will be debited from your account upon vesting, and will be forwarded to your company for reporting and remitting to the appropriate regulatory agencies. You retain the full number of shares that vested.

  If you choose to pay your withholding obligation with cash from your Fidelity Account, please note that you must have cash in that account on the vesting date to avoid having your account restricted. Electing to pay for the estimated tax withholding with cash does not fund your account.

• Sell to Cover
  If you elect to sell to cover, you are directing Fidelity Stock Plan Services to sell a portion of your vesting shares to cover your tax withholding obligation and any applicable commissions and fees. Proceeds from your sale will be debited from your account and will be forwarded to your company for reporting and remitting to the appropriate regulatory agencies. You retain the number of vested shares less any shares sold for tax withholding, commission and fees.

Assume that Mike has 250 restricted stock units vesting on January 1, 2004 but distributing on January 1, 2005. Assume the tax obligation at vesting is $500, the stock price on January 1, 2005 is $10 per share, and the tax withholding obligation at distribution is $725.

• Pay Cash at Vest, Net Shares at Distribution
  On January 1, 2004, when the 250 units vest, Mike must have $500 cash in his Fidelity AccountSM to cover his tax withholding obligation. The $500 is debited from Mike's account and forwarded to his company for reporting and remitting to the appropriate regulatory agencies. Mike is left with the 250 units that vested.

  When the 250 shares are distributed on January 1, 2005, Mike's company withholds 73 shares (73 shares x $10 per share = $730) to cover the $725 tax withholding obligation. The $5 overage is applied to Mike's federal income tax. Mike is left with 177 shares (250 vested shares - 73 shares withheld to cover the tax withholding obligation = 177 shares remaining).

• Example 2 - Pay Cash at Vest and at Distribution
  On January 1, 2004, when the 250 units vest, Mike must have $500 cash in his Fidelity Account^SM to cover his tax withholding obligation. The $500 is debited from Mike's account and forwarded to his company for reporting and remitting to the appropriate regulatory agencies. Mike is left with the 250 units that vested.

  On January 1, 2005, when the shares are distributed, Mike must have an additional $725 cash in his Fidelity AccountSM to cover his tax withholding obligation. The $725 is debited from Mike's account and forwarded to his company for reporting and remitting to the appropriate regulatory agencies.

• Example 3 - Sell to Cover
  When the 250 shares vest on January 1, Fidelity Stock Plan Services sells 74 of the shares (74 shares x $9.90 assumed stock price at time of sale = $732.60) to cover the $725 tax withholding obligation. Any overage ($2.60) remains in Mike's account. He retains 176 shares (250 vested shares - 74 shares sold to cover his tax withholding obligation = 176 shares).

How is tax withholding calculated?

Tax withholding is calculated based on the total fair market value of your grants on the grant date (less the amount you paid for the shares, if any) multiplied by the tax withholding rate supplied by your company. You must have funds available in your Fidelity Account to satisfy the withholding obligation. The withholding will be sent to your employer for tax payment.

How can I determine how much will be withheld for taxes upon vesting?

Click Estimate Gain to estimate your tax withholding obligation. Enter your grant data to estimate taxable income and tax withholding on vesting.

Related Help Topics

• Accepting and Declining Grants