What Is Accelerated Vesting?

Accelerated vesting allows an employee to speed up the schedule for gaining access to restricted company stock or 澳洲幸运5官方开奖结果体彩网:stock options issued as an incentive. The rate typically is faster than the ini𝓀tial or standard vesting schedule. Therefore, the employee receives the monetary benefit from the stock or options🌄 much sooner.

If a comp꧃any decides to undertake accelerated ve🔜sting, then it may expense the costs associated with the stock options sooner.

How Accelerated Vesting Works

Employee stock or stock option plans provide incentives for employees to perform at a higher level and remain with the company longer. These rewards vest over time, meaning the amount actually available for the employee to withdraw in👍creases on a set schedule.

For highly valued employees, companies may choose to accelerate the normal vesting schedule, which creates a higher 澳洲幸运5官方开奖结果体彩网:present value for the employees. The benefit to the employees creates potential issues for the company, including the risk that the employee will take the money and🔥 leave the company shortly after that.

Changes in vesting have tax consequences for both the comꦫpany an𒐪d the employee.

Reasons to Implement Accelerated Vesting

Aside from simply offering better compensation to highly valued employees, a company, especially a young company or startup, might use accelerated vesting to make itself more attractဣive to an acquiring company. For example, a young company goes public, but the majority of shares awarded to employees are not yet vested. Perhaps it is year two in a five-year vesting schedule.

The employee stock or option plan might have a provision that upon takeover by another entity, employees become fully vested. It is an incentive for these employees to remain with the company until and through the 澳洲幸运5官方开奖结果体彩网:acquisition.

A similar reason would be to keep employees until and through an 澳洲幸运5官方开奖结果体彩网:initial public offering (IPO).

Acceleration Triggers

There are several forms of acceleration provisions, but the two most common are single-trigger and double-trigger. Typically, the common 澳洲幸运5官方开奖结果体彩网:triggering event for both i🅘s the sale of the company or a change in its 💙control.

Single-trigger, as discussed above, provid🐬es that at a sale or change of control, some or all of the restricted stock will imme🦹diately become vested.

A double-trigger typically starts with the sale or change of control bꦺut does not cause acceleration until a second event occurs. This second event could include the termination of the founder without cause or if they leaveಌ the company within a set time period (typically six months to one year following the sale or change of control). The company can include any triggering events as long as they spell them out clearly in the employee compensation plan.

The Bottom Line

Standard stock options as well as accelerated vest🎃ing are often used as a means to retain top performing employees; accelerated vesting brings earlier financial rewards. Accelerated vesting allows employees to access their stock options sooner tha🍒n the set vesting schedule allows.

Risks with accelerated vesting include employees leaving after receiving the benefit unless stipulations are put in place. Additionally, stock options come with tax implications that both employer and employee need to be aware of.