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GPS: Restricted Stock and Restricted Stock Units
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In recent years, more companies have been offering restricted stock awards (RSAs) and restricted stock units (RSUs) as equity compensation. While restricted stock grants can be an effective way to bolster employee retention, they present administrative challenges and risks for stock plan professionals. This publication, produced by the Certified Equity Professional Institute (CEPI) at Santa Clara University and distributed by the NCEO, is part of the CEPI's GPS (Guidance, Procedures, Systems) series. It gives stock plan professionals much-needed guidance about processes and controls for managing RSAs and RSUs. Offering very specific and practical guidance and reading almost like a primer on managing RSA/RSU plans, this is the first publication that addresses in one place both regulatory and administrative issues specific to restricted awards. The publication includes many practical examples of illustrative controls and associated processes, along with specific considerations for outsourced administration. It is a resource to define processes and controls and to prepare for both internal and external audits.
Publication Details
Format: Perfect-bound book, 77 pages
Publication date: October 2008
Status: In stock
Contents
Introduction
Restricted Stock and Restricted Stock Unit Basics
Strategic and Tactical Design Issues
General Administration
Grant Process
Dividend Process
Vest/Release Process
Tax and Payroll Issues
Accounting Issues
Legal Issues
Changes of Employment Status
Performance Awards
Appendices
Restricted Stock and Restricted Stock Unit Basics
Strategic and Tactical Design Issues
General Administration
Grant Process
Dividend Process
Vest/Release Process
Tax and Payroll Issues
Accounting Issues
Legal Issues
Changes of Employment Status
Performance Awards
Appendices
Excerpts
7.2. Overview of the Tax and Payroll Issues
7.2.1. Tax and payroll issues are among the most complex and challenging areas of administration. When the risk of forfeiture lapses for a restricted stock award (normally at vest), the employee recognizes taxable gain equal to the FMV of the shares on the lapse date (or the difference between the FMV and purchase price if the purchase price was not $0). The Company is required to withhold federal, state, local, and FICA taxes on the taxable income. In addition, the Company must include the taxable gain as income in the employee's Form W-2. When restricted stock units vest, the FMV of the award is only subject to FICA, and when the units are released, the FMV of the award is subject to federal, state, and local income taxes. For purposes of this publication, we have assumed that the vest date and release date occur simultaneously. Therefore, FICA and income tax will be withheld at the vest/release date for restricted stock units. However, it should be noted that in other circumstances, the taxation of restricted stock units may be bifurcated. Controls associated with the withholding and reporting process are discussed in Questions 30, 31, 32 and 34.
