Does 409A apply to RSUs?

Of the common types of equity awards, RSUs are the most likely to be subject to Section 409A. An RSU that appears to be excluded from Section 409A as a short- term deferral because it generally pays on vesting may in fact be subject to Section 409A if vesting of the RSU: ∎ Accelerates when the employee retires.

What happens when RSUs lapse?

Lapsed Options The shares that the option holder has the right to buy are reserved during the vesting period. But if the holder fails to exercise, then the shares become available for the company to sell to other buyers or otherwise dispose of.

What is final lapse date for RSU?

On February 3, 2018, the restriction lapses on 25\% more RSUs and then on February 3, 2019, the final 50\% restriction lapses and the remaining units of your 2016 RSU grant are paid out.

Can vested options lapse?

When an option holder leaves, their options may be treated in one of three ways where the options will: lapse; be transferred; or. be retained by the employee.

Do RSUs vest if you leave?

5 Selling Strategies for Your Vested Restricted Stock Units If you wait until after the one-year mark, you can expect to pay long-term capital gains tax which is much lower in most cases. Sell a Portion and Keep a Portion – Another selling strategy is to sell off some of your shares and keep some.

How do I report a 409A failure?

Amounts that have failed Section 409A are reported to employees on Form W-2, Box 12, using Code Z. Amounts that have failed Section 409A are reported to nonemployees (such as directors or certain independent contractors) on Form 1099-MISC, Box 14.

Are RSUs with delayed vesting subject to 409A?

RSUs with delayed vesting normally fall outside of Section 409A because of the “short-term” deferral exception. But RSUs that vest upon retirement eligibility and that are payable in a year after the vesting year are “deferred compensation” under Section 409A, and must meet the 409A payout rules.

Are your RSUs about to fully vest?

Congratulations: your RSUs are about to fully vest! RSUs issued by a private company are sometimes called “double-trigger RSUs.” You must meet two criteria for your RSUs to fully vest: (1) you have to work for a certain period of time (e.g., 25\% of your RSU grant vests every 12 months), and (2) your company must have a liquidity event (e.g., IPO).

Which Equity Awards are subject to Section 409A?

Of the common types of equity awards, RSUs are the most likely to be subject to Section 409A. An RSU that appears to be excluded from Section 409A as a short- term deferral because it generally pays on vesting may in fact be subject to Section 409A if vesting of the RSU: „„Accelerates when the employee retires.

Can a change in control trigger a 409A failure?

Many RSUs have a broader “change in control” definition that would cause a Section 409A failure. An alternative way to satisfy section 409A is a “double trigger” payout provision, providing that the RSU vests upon a change in control, however broadly defined, but pays when the employee terminates thereafter.