Your Equity Compensation Can Help You
Reach Your Life’s Goals
Owning equity in the company you work for makes you more than an employee, it makes you a shareholder. Here’s how to better understand and use your equity compensation so you can achieve your goals.
Why Equity Compensation Matters
Learn more about the benefits of receiving equity compensation and how it can help improve your financial situation.Get the 101
Demystifying Equity Compensation
Get your questions answered on stock options, restricted stock units (RSUs), Employee Stock Purchase Programs (ESPP) and more.Get the 201
Taxes and Your Equity Compensation
A better understanding of the tax implications of key events in your equity’s lifecycle can go a long way.Learn more
Ways To Invest Your Equity Compensation
Morgan Stanley can help you use your equity compensation to reach your financial goals.See how
Why Equity Compensation Matters 101
Company equity compensation can play a key role in your financial life. Learn more about why equity compensation is an important tool in your financial toolkit and how it can help you reach your life’s goals.
Demystifying Equity Compensation 201
The first step in making the most of your equity awards and benefits is to understand the specifics of what you hold. Check your plan documents to identify the type of equity compensation you own. To understand the value of your ownership, stay abreast of your company’s stock price and the number of shares you own.
To take advantage of your stock options, you have to purchase the stock at a fixed grant price (aka exercise price or strike price) during a specific period of time.
There are two types of stock options in the U.S.: Incentive Stock Options (ISOs) and Non-Qualified Stock Options (NQSOs). Your grant documents will confirm which type(s) you have.
Learn more about the typical U.S. federal income tax treatment of stock options here.
Restricted Stock Units (RSUs)
Restricted stock units (RSUs) are a promise to deliver shares of company stock to the holder on a specified event or date (known as vesting). Some companies award a set number of RSUs, while others award RSUs based on a set dollar value. You do not need to purchase the shares as they are granted to you once they fully vest.
There are several factors that can impact the vesting of RSUs. Most RSUs require you to stay employed at the company for a certain amount of time before the RSUs will vest. This is known as a "time trigger“. Time triggers for vesting can be anywhere from immediate at grant through five years or longer.
Some companies have additional conditions that must be met for RSUs to vest, which can include going public, company or individual performance, and more. The details of your vesting conditions can be found in your equity award documents.
Employee Stock Purchase Plan (ESPP)
An Employee Stock Purchase Plan (ESPP) is a benefit some public companies offer. Through payroll deductions, employees can purchase company stock at a discount to the current market price.
While the amount of the discount, the number of share purchase periods that happen annually, and other factors vary by company, an ESPP is one of the most common ways for employers to incent employees to become company shareholders.
U.S. Federal Income Taxes and Your Equity Compensation
The type of equity compensation you are offered will impact the timing and type of taxation you will be subject to.
For example, you can control the timing of U.S. federal income tax events associated with stock options, Restricted stock units or RSUs have a taxable event when they vest and when you sell the underlying shares. While you can control the timing of the sale, vesting is dictated by your vest schedule. ESPP tax consequences depend on how long you hold your purchased shares before selling them.
In some cases, your employer may withhold part of your proceeds to cover a portion of your tax responsibility. Most equity is taxed at the federal, state and local levels. Work with a tax professional to understand your personal situation.
Ways To Invest Your Equity Compensation
Whether you prefer hands on advice or want to do more yourself, there are a range of modern solutions that can help you make the most of your equity compensation and finances. Explore to identify what’s best for you.