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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.
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.
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.
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.
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.
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.
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.
A distribution schedule is the schedule for actual payment to you under your company's plan.
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.
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.
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.
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.
You can view vesting schedule information, grant details, and the grant's current estimated value.
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.
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.
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.
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.
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.
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.
See Accepting and Declining Grants for details.
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 circumstances, 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.
Depending on plan rules, you have three options to meet your tax withholding obligation due at vesting:
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.
Click Estimate Gain to estimate your tax withholding obligation. Enter your grant data to estimate taxable income and tax withholding on vesting.