Skip to main content
Education Center » My restricted stock will vest soon - now what?

My restricted stock will vest soon - now what?

IR_My_restricted_stock_will_vest_soon_now_what_Hero_220x146px

If your employer has granted you a restricted stock award, you generally have to wait until the grant vests for the shares to be non-forfeitable and transferable. Each grant may have different vesting requirements, which often are based on a stated period of time from the grant date. Either way, you’ll have a few “to-dos” as the vesting date approaches.

Grant acceptance

Some plans require grants to be formally accepted. As such, you may be required to accept your grant prior to the lapse (or vesting) date to help ensure prompt delivery of shares. Check your company's equity award plan documents and grant agreements to be sure you understand what is required for your specific situation.

If your company's equity award plan is at Merrill, view this quick reference guide for step-by-step instructions on accepting your grant.

Brokerage account

Before the vesting date, it's important to open an account with the brokerage firm or transfer agent that your company designates. This facilitates the delivery of shares at vesting, and having the account will enable you to conduct transactions related to those shares. It's important that you open an account, as your company may have a policy of not delivering shares until you have done so. You also should complete either IRS Form W-9 (for U.S. tax residents) or IRS Form W-8BEN (for nonresident aliens). If the account does not have this form (or if you have not recertified), you will be subject to tax withholding on the gross proceeds derived from any sale of shares.

If your company's equity award plan is at Merrill, view this quick reference guide for step-by-step instructions on opening a limited individual investor account to manage your awards. Visit the Company Stock Education page on the Benefits OnLine® Education Center for guides, articles and videos about managing your equity awards.

Tax decisions

Upon receipt of the awards, you may be required to make a tax election indicating how you want to pay the tax withholding due when your award vests (assuming no section 83(b) election was made).1 For example, you may wish to pay your taxes by having some of your shares withheld, or with cash. Your company may have a mandatory tax withholding method, in which case you don’t have to make a decision, or it may have a default method that it will use if you don’t elect your tax withholding method by the deadline. Check your plan documents and grant agreements to be sure you understand what is required for your specific situation.

You will owe taxes on the value of the restricted award shares at vesting, which is generally when the shares are delivered into your account.

For federal tax purposes, the tax withholding generally is required to be at the rate for supplemental wages (usually 22%, though it is 37% for aggregate amounts of supplemental wage income above $1 million during a calendar year2). In addition, Social Security tax will be withheld up to the yearly maximum, along with Medicare tax (plus any state and/or local taxes on this type of income).

If your company's equity award plan is through Merrill, view this quick reference guide on making a tax election for your equity award on Benefits OnLine®.

Hold, sell or gift?

What will you do with the shares once you receive them? You may decide to sell or gift the shares, transfer them to another account or change them to joint ownership. A financial professional can help you take a look at your personal financial goals, both long- and short-term, and guide you in making these decisions.

Learn more and take action

Visit the Company Stock Education page on the Benefits OnLine® Education Center for guides, articles and videos about managing your equity awards.

Merrill, its affiliates, and financial advisors do not provide legal, tax, or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.

 
Print

BOL_EDU_ROLLOVER_BANNER_2018

1 If you received restricted stock, and you timely and properly made a section 83(b) election, you will recognize ordinary income equal to the excess of the fair market value of the stock at the time of grant over any amount paid for the shares. A subsequent sale of the shares will result in capital gain or loss.

2 Source: IRS Publication 15 (2022)

Merrill, its affiliates, and financial advisors do not provide legal, tax, or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.

4692353

(VA12********3V)