Chat with us, powered by LiveChat

Do you know the difference between an RSA and an RSU?

RSAs vs RSUs

RSA-vs-RSU

 

The two may be close cousins, but there are three significant differences between an RSA and an RSU.

  1. A Restricted Stock Award (RSA) is a grant that will provide you with a right to purchase shares at the FMV (fair market value), a discount, or you may receive shares at no cost. The first difference to note is the company shares for an RSA granted are given at the time of grant enabling you to have voting rights. The second difference to note is the ability to elect to file an 83b Election (allowing special tax considerations to pay tax on grant date rather than at lapse- this can be tricky and you should consult your tax adviser). But the shares you will acquire are not really yours. Technically you cannot take possession of them until specified restrictions lapse. Most commonly, the vesting restriction lapses if the employee continues to work for the company (generally for a certain number of years). Alternatively, a time-based restriction may lapse all at once or gradually. Keep in mind though that any restrictions could be imposed. In addition, and not to be confusing, there may also be a performance restriction added that must be achieved before the restrictions lapse. We can discuss this another time.
  2. The Restricted Stock Unit (RSU), is a grant valued in terms of company stock. But you do not actually receive shares until the restrictions lapse or vest. Once the unit satisfies the vesting requirement, you then receive the shares (or cash if offered pertaining to the plan rules at the equivalent of the number of shares).
  3. The third difference to note is that unlike their cousin the RSAs, an RSUs release of shares may be deferred until a later date. This means you, the employee, must pay statutory minimum taxes as determined by the employer at vesting, but payment of all other taxes can be deferred until the time of distribution/when you actually receive the shares (you are choosing to defer receipt of the shares as well) or cash equivalent (again depending on the company’s plan rules). Contact us to go into detail on how this calculation works.

I hope this gets you started on the path to knowing the difference between RSA/RSUs. To learn more check out our equity administration solutions

 

Mark Griffin Global Shares

Author: Mark Griffin

Title: Business Development Director Ireland – Global Shares

Email: mgriffin@globalshares.com

Phone: +353 23 883 3062

LinkedIn: https://www.linkedin.com/in/mark-griffin-34a86055/

 

RSA vs RSU

Learn more about equity compensation and the benefits to your employees….

 


 

globalblog

Author

globalblog

Up Next

Related Posts