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A restricted stock award (RSA) is a form of equity compensation used in stock compensation programs. An RSA is a grant of company stock in which the recipient's rights in the stock are restricted until the shares vest.
A Restricted Stock Award is a grant of company stock in which the recipient's rights in the stock are restricted until the shares vest (or lapse in restrictions). The restricted period is called a vesting period. 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 shares are typically forfeited.
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, and therefore no Special Tax 83(b) elections can be made at grant. At the time of distribution of an RSU, the issuer distributes a value based on the value of the stock, either in cash, in stock, or in a combination of cash and stock as set forth in the plan rules. 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 shares 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 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.
Once you are granted a restricted stock award, you must decide whether to accept or decline the grant. If you accept the grant, you may be required to pay your employer a purchase price for the grant.
After accepting a grant and providing payment (if applicable), you must wait until the grant vests. When the grant vests, you receive the shares of company stock or the cash equivalent (depending on your company's plan rules) without restriction.
There are usually special rules in the event you retire, die or become disabled. See your employer's plan rules for details.
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 shares 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.
Once the holding period has been met, the shares or cash equivalent (depending on your company's plan rules) of company stock are automatically deposited into your Fidelity Account. Once the shares have vested, you own them outright, and may hold, sell, or otherwise dispose of them without risk of forfeiture. If your grant is paid in cash, you may use the cash as you would any other cash in your account.
If you leave your employer prior to the date your restricted stock awards vest, typically you forfeit your grants. Check your company's plan for details.
The Summary page for restricted stock awards displays information about grant totals, unaccepted grants, and accepted grants. From this page, you can view detailed information about a particular RSA, accept or decline unaccepted RSAs, select an 83(b) Tax Election for an accepted RSA, or select a tax withholding method which will take effect at vesting for an accepted RSA.
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 of your unvested grants.
The fair market value is the value of the shares at the time they vest and the proceeds are delivered to you. Fair market value is specified in your RSA agreement, and is used to determine the amount of income treated as compensation for federal income tax purposes. Your company's RSA plan rules determine the how fair market value is calculated for your RSAs. 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 divided by the number of RSA shares you own.
The expiration date is the date on which your 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 award 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, including 83(b) tax election details, if applicable.
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 shares, 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. You can elect a tax withholding method for each RSA still requiring a tax withholding election.
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, you are not taxed at the time of a restricted stock award, assuming you have made no election under Section 83(b). Instead, you are taxed at vesting, when the restrictions lapse. 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, your tax holding period begins at the time of vesting, and your 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 you hold the shares as a capital asset, you would recognize capital gain income (or loss); whether such capital gain would be a short- or long-term gain would depend 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.
A default election, decided by your company, will be made for you if you have not made an election 15 days prior to vesting. You can change your tax withholding method election up to seven days prior to vesting.
Depending on plan rules, if you decide not to make a Special Tax 83(b) election, you have three options to meet your tax withholding obligation due at vesting:
Say that Mike has 250 shares of restricted stock vesting on January 1, 2004. Assume the stock price on January 1 is $10 per share and the tax withholding obligation is $725.
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.
Click Estimate Gain to estimate your tax withholding obligation. Enter your grant data to estimate taxable income and tax withholding on vesting.
Under Section 83(b) of the Internal Revenue Code, you can change the tax treatment of your restricted stock award shares. If you choose to make the Special Tax 83(b) election, you elect to include the fair market value of the stock at the time of the grant minus the amount paid for the shares (if any) as part of your income (without regard to the restrictions). You are subject to required tax withholding at the time the restricted stock award shares are received. In addition, a Special Tax 83(b) election causes the stock's holding period to begin immediately after the grant is granted.
Under 83(b), you are not subject to income tax when the shares vest (regardless of the fair market value at the time of vesting), and you are not subject to further tax until the shares are sold. Subsequent gains or losses of the stock would be capital gains or losses (assuming the stock is held as a capital asset). However, if you leave your company prior to vesting, you would not be entitled to any refund of taxes previously paid or to a tax loss with respect to the stock forfeited.
A Special Tax 83(b) election form must be filed in writing with Internal Revenue Service (IRS) no later than 30 days after the date of the grant, and you must send a copy to your company. You must also include a copy when filing your yearly income tax return.
The are several potential advantages of making a Special Tax 83(b) election:
The are several potential disadvantages of making a Special Tax 83(b) election:
Click Select 83(b) Tax Election to display the Select 83(b) Tax Election page. Click Select 83(b) Election next to a grant. Read the 83(b) tax election terms, and follow the on-screen instructions to preview your election and notify Fidelity of your intention to accept or decline the 83(b) tax election. A confirmation page displays a unique number referencing your intention to accept or decline the 83(b) tax election. If you contact Fidelity, use this number to identify your decision. You should print this confirmation for your records.
If you accept the 83(b) tax election, you must fill out a Special Tax 83(b) election form and file it with the Internal Revenue Service (IRS) within 30 days of the date of grant. You must also send a copy of the Special Tax 83(b) election to your employer, and attach a copy of the form when you file your yearly income tax return. Under the IRS rules, an 83(b) election is irrevocable; the election is made when the form is filed with the IRS.
For more information on filing the form or the 83(b) tax election, please contact a Stock Plan Services representative at 1-800-544-9354. Consult your tax adviser regarding the income tax consequences to you.