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Incorporating Restricted Stock Units in Long-Term Incentive Compensation Plans

Accelerating Equity Awards, Navigating Section 409A Restrictions, Tax Planning, Plan Structures for Employers

Recording of a 90-minute premium CLE/CPE video webinar with Q&A

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Conducted on Wednesday, August 23, 2023

Recorded event now available

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This CLE/CPE will provide executive compensation and employee benefits attorneys an in-depth analysis of the rules and key considerations for incorporating restricted stock units (RSUs) in long-term incentive compensation plans. The panel will discuss the advantages and disadvantages of accelerating equity awards, key tax issues and planning techniques, restrictions under Section 409A, and other critical structuring considerations for employers.

Description

RSUs continue to be a popular form of equity compensation, mostly due to their flexibility. Executive compensation and benefits attorneys must have a clear understanding of applicable federal tax rules and restrictions regarding the inclusion of RSUs when structuring compensation plans.

RSUs represent a contractual right to a certain number of stock shares, or cash payment of equal value, to an employee subject to a vesting schedule. The shares, or the cash equivalent, are not delivered until vesting and forfeiture requirements are satisfied, and the holder has no voting rights during the vesting period.

RSUs are taxed as regular income, making the terms of any vesting schedule a key item to consider for both employers and employees. However, the taxation of RSUs can be deferred even after vesting, allowing the employee to coordinate the timing of tax recognition. Any deferral must comply with Section 409A. Any failure to do so can cause immediate taxation upon vesting and subject the recipient to an additional 20 percent income tax and penalties.

Listen as our panel discusses the challenges of incorporating restricted stock units in compensation plans, available planning techniques, restrictions under Section 409A, and other critical structuring considerations.

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Outline

  1. Incorporating RSUs in compensation plans
  2. Tax issues and recent IRS guidance
  3. Accelerating equity awards
  4. Best practices for attorneys representing the employer or employee

Benefits

The panel will review these and other key issues:

  • What are the key items to consider for incorporating RSUs when structuring compensation plans?
  • What are the key tax issues and available planning techniques to minimize them?
  • What are the restrictions under Section 409A?
  • What are the advantages and disadvantages of accelerating equity awards?

Faculty

Lampron, Shawn
Shawn E. Lampron
Partner
Fenwick & West

Ms. Lampron focuses her practice on executive compensation and employee benefits for emerging growth businesses, public...  |  Read More

Mort, Marshall
Marshall Mort
Partner
Fenwick & West

Mr. Mort focuses his practice on representation of public and private technology and life sciences companies in a wide...  |  Read More

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