What Happens to Your RSUs When You Leave a Company? 7 Things to Watch For
When you leave a company, your vested RSUs are yours to keep, and your unvested RSUs are usually forfeited on your last day unless your grant agreement says otherwise. Whether you're quitting, retiring, or getting laid off, these are the seven things to watch for before and after your last day.
1. What happens to unvested RSUs when you quit or get laid off?
Unvested RSUs are usually forfeited when your employment ends. Most plans require you to be employed on the vest date, so leaving even a few days before a vest can cost you an entire tranche. Check your equity portal and set your last day, not just your notice date, around any upcoming vest.
2. Does your grant agreement have exceptions?
Some do. Grant agreements may continue or accelerate vesting for layoffs, retirement after a certain age or tenure, disability, death, or an acquisition. If you're being laid off, severance terms are sometimes negotiable, and some employers will extend your end date past a vest. Read the terms and ask before you sign a separation agreement.
3. Why do you owe more tax on RSUs than was withheld?
RSUs are taxed as ordinary income when they vest, and employers usually withhold federal tax at the 22% supplemental rate (37% on supplemental wages over $1 million). If your marginal rate is higher, you'll owe the difference when you file. A final vest and severance landing in the same year makes this more likely.
4. Why does your 1099-B show a $0 cost basis for RSU shares?
Brokers often report RSU cost basis as zero or leave it blank. Your actual basis is the share price on the vest date, because you already paid income tax on that value. If you don't correct it on Form 8949 when you sell, you can end up paying tax on the same income twice.
5. Do you owe state tax on RSUs after moving?
Possibly. If you worked in one state while your RSUs were vesting and moved before they vested, your former state may tax part of that income. New York, for example, allocates RSU income based on the days you worked in New York between grant and vest.
6. How do you access your RSU shares after you leave?
Vested shares usually stay with your company's plan administrator, such as Fidelity, Schwab, or E*TRADE. Before your last day, switch the account to your personal email and download your vest history and tax documents. Also check your company's insider trading policy, since some restrictions can still apply to former employees for a period after they leave.
7. What happens to private company RSUs when you leave?
Many private companies use double-trigger RSUs, which require both time served and a liquidity event like an IPO or acquisition before they fully vest. Depending on the plan, units that met the time requirement may survive your departure, but many expire if no liquidity event happens within a set period, commonly around seven years. Know your expiration date before you leave.
Leaving Soon?
If you're planning your exit or just got news you're being let go, the weeks before your last day are when most of these decisions can still be changed. I'm happy to look over your grants and walk through your options. Book a time here.
About the Author
Michael Walstedt, CFA, CFP®, is the founder of Reliant Wealth Advisory, a fee-only fiduciary firm based in Hoboken, New Jersey. He works with tech professionals, executives, and business owners on equity compensation, taxes, and investment planning.
This article is for educational purposes only and is not individualized tax, legal, or investment advice.
