January 17, 2007

stock award vesting

Yesterday was my one year anniversary at work. That also meant that 1/5 of the total stock award I received when I joined was going to vest. I was all excited. I mean, the total number of shares involved wasn't much, but still, I thought it'd be a nice lil' bonus. I had received 170 shares total as part of the award, and on the 16th, I was expecting 34 to vest.

I checked my Fidelity account today and saw that only 19 shares had been transferred. "Do they do transfers in piecemeal?" was the question that first popped into my mind. I did a lil' reading on the company site's FAQ on stock awards, and found out that 19 was, indeed, all I could look forward to.

You see, there's this thing called taxes. When stock awards vest, it’s a taxable event and as such, the fair market value of the shares vested is considered compensation income. Therefore, when my first batch of stock vested, it was converted into an equivalent number of common shares, and then the required tax withholding would be paid with a portion of the shares that vested. What remains after gets transferred to my Fidelity account.

It’s a real bummer when over 44% of the number of shares you were expecting gets zapped because of taxes. Damn Uncle Sam. =P

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