guide to understanding employee restricted...

CERTAINTY INGENUITY ADVANTAGE

Guide to Understanding Employee Restricted Stock

1 > Guide to Understanding Employee Restricted Stock

Introduction to Employee Restricted Stock �� 2

An Opportunity for Reward with Limited Risk �� 2

How does Restricted Stock Work? �� 2

Preparing for your Restricted Stock Vesting�� 3

Tax Election Methods �� 3

Payroll Withholding �� 3

Cash �� 3

Withhold Shares �� 3

Selling Enough �� 3

Taxation of Restricted Stock �� 3

Receiving Your Net Proceeds �� 3

Direct Deposit �� 3

Wire Transfers �� 3

Check �� 3

Required Forms �� 4

Accessing and Managing your Account �� 4

Glossary �� 5

Contents

> 2

Restricted stock is often an important element in a company’s

compensation package and is usually intended as both a reward

and an incentive� Companies grant restricted stock to their

employees to promote a sense of ownership, recognize individual

contributions and encourage a focus on the company’s long

term success�

An OPPORtunIty fOR REwARd wIth LImItEd RISk

When you are granted restricted stock, you become a

shareowner; however, the stock that you hold will have

restrictions that can prevent you from selling it until certain

criteria are met� Restricted stock typically provides voting rights

and dividend payments to grantees prior to lapse� Once the grant

lapses, restrictions will typically be lifted, granting you the right to

sell or transfer the stock and other benefits of stock ownership�

hOw dOES REStRIctEd StOck wORk?

Generally restricted stock is subject to a service-based vesting

period� This means that you may need to work for the company

for a period of time before the restrictions are lifted� This could

be a cliff vesting in which 100% vests at one time at the end of

the period (ie; 3 years)� Another example is a graded vesting

over a period of time such as 5 years whereby 20% will become

vested on the anniversary each year� Restricted stock can also

be subject to performance-based vesting� This means that the

restricted stock vests when a specific performance criterion is

met within a specific time frame�

Introduction to Employee Restricted Stock


tAx ELEctIOn mEthOdS

Prior to the vesting of your restricted stock, you must decide

which tax payment method you wish to use� Please note: In

accordance with the plan rules and local laws, certain methods

may not be available�

Payroll withholding

This tax payment method advises your company to withhold

funds from your paycheck to cover the required tax withholding

and applicable brokerage commission and fees� You will receive

your proceeds as shares of stock�

cash

This tax payment method allows you to provide cash to cover

the required tax withholding� You will receive the full number of

shares that vest�

withhold Shares

This tax payment method allows your company to withhold

shares from your grant to cover the taxes due� Your company

will pay the taxes due to the IRS� You will receive your proceeds

in shares less the number of shares withheld to cover the taxes

due�

Selling Enough

This tax payment method will sell enough shares from your grant

to cover the taxes� You will receive your proceeds in shares, less

the number of shares sold to cover the taxes due� Any sale of

shares will result in the issuance of a 1099B at year end�

Note: Some plans allow for the immediate sale of all shares

whereby the taxes due are netted from the gross proceeds of

sale and the participant receives cash� See the various cash

disbursement methods that may be allowed by your plan�

Preparing for your Restricted Stock Vesting

tAxAtIOn Of REStRIctEd StOck

When restricted stock vests; taxes are due immediately�

You can model the different methods allowed by your

company within your Computershare account at

www�computershare�com/employee/us� You may be required

to make an election if your company offers more than one tax

election method�

REcEIVInG yOuR nEt PROcEEdS (If thE SALE Of ALL ShARES IS AVAILAbLE)

Your net proceeds will be distributed via the method that

you selected at the time of the restricted stock lapse or in

accordance with your instructions on file� Following are the

options from which you may choose:

direct deposit

You are able to set up direct deposit instructions to transfer

cash proceeds online via the Employee Online website at

www� computershare�com/employee/us�

wire transfers

You are able to set up wire instructions to transfer cash

proceeds online via the Employee Online website at

www�computershare�com/employee/us� Wire transfers may be

subject to a fee, depending on your company’s plan� See your

plan document for details�

check

The default method to receive proceeds is by a check�

> 4

REquIREd fORmS

The IRS requires that you certify your tax status by

completing Form W-9 or Form W-8BEN� You can certify

your tax status via the Employee Online website at

www�computershare�com/employee/us or by calling the

communications center to have a copy of the appropriate

form mailed to the address on record with Computershare� If

you do not certify your tax status, your net proceeds will be

subject to the Internal Revenue Service’s (IRS) mandated 28%

withholding tax� Please note: Form W-9 does not expire� Form

W-8BEN expires on December 31, three years after the year that

you certify�

AccESSInG And mAnAGInG yOuR AccOunt

Log in to your account at www�computershare�com/employee/us

to view, manage and transact on your account� You can also

call the Computershare communications center at the number

listed on your plan correspondence� The Computershare

communications center is available from 3:00 a�m� - 9:00

p�m� ET� The same phone number may be used to access the

Computershare Interactive Voice Response (IVR) system�


Glossary

Capital Gain – The profit that results from the sale of an asset,

such as a stock�

Common Stock – A security that represents units of ownership

of a public company� An owner of common stock would typically

be entitled to proxy votes and any dividend payments made by

the company�

Dividend – A distribution to shareholders that represents

participation in the company’s profits and earning� Dividends

may be paid in either stock or cash�

Fair Market Value – The price at which a company’s stock can be

bought or sold in the open market at a given time�

Grant Date – The date that restricted stock is “granted” or

issued� This date is often used as a starting point for other

relative dates such as vesting�

Vested – Restricted stock that has met certain time and/or

performance requirements and will typically have sell restrictions

removed�

Vesting Date – The earliest date that your restricted stock will

have restrictions removed�

W-8BEN – Certificate of Foreign Status form required by the IRS

to tell the payer, transfer agent, broker or other middleman that

an employee is a nonresident alien or foreign entity that is not

subject to US tax reporting or backup withholding rules�

W-9 – A form that is required by the IRS for US taxpayers and

citizens to certify their Social Security number or Taxpayer

Identification Number� If form W-9 is not completed, sales of

stock may be subject to applicable backup withholding tax�

Please note: The information contained herein is not investment

advice or tax advice, but only a general overview of restricted

stock. Computershare does not provide tax or legal advice,

make any recommendations as to whether and when you should

dispose of your stock, or advise which tax payment election is

best for you. We suggest that you consult with your own tax

and/or investment advisor about these matters, as well as the

personal tax consequences of your restricted stock grant and the

sale of your shares.

Computershare does not provide tax or legal advice� Please consult your tax and/or legal advisor for such guidance�©2014 Computershare Inc� All rights reserved� Participant_Guide_RS_082114

Computershare is a global market leader in transfer agency, employee equity plans, proxy solicitation, stakeholder communications, and other diversified financial and governance services� Many of the world’s leading organizations use Computershare’s services to help maximize the value of relationships with their investors, employees, creditors, members and customers�

www.computershare.com

guide to understanding employee restricted...

Documents