Fidelity Stock Plan Services gives employees a centralized way to manage workplace equity compensation, including restricted stock units, employee stock purchase plans, stock options, restricted stock awards and other company-sponsored benefits. Through Fidelity NetBenefits and an associated Fidelity brokerage account, eligible employees can review awards, monitor vesting schedules, enroll in certain plans, exercise eligible options, manage company shares and access information about taxes and account activity.
Employee stock compensation can become an important part of total compensation, particularly for workers at publicly traded companies and rapidly growing businesses. However, stock awards can also involve deadlines, vesting conditions, tax withholding, trading restrictions and investment decisions that are different from those associated with a traditional paycheck.
Understanding how the system works can help employees keep track of their awards and avoid missing important actions.
What Is Fidelity’s Stock Plan Platform?
Fidelity’s workplace stock-plan platform is designed to support employees who receive equity compensation from their employers. The service works alongside Fidelity NetBenefits, where participants can generally find information about their individual awards and company stock plans.
The exact experience depends on the employer’s plan. One company may offer RSUs and stock options, while another may provide an employee stock purchase plan. Some employers may offer multiple types of equity compensation at the same time.
The Stock Plan Resource Center currently covers several major forms of workplace compensation, including:
- Restricted stock units
- Restricted stock awards
- Employee stock purchase plans
- Stock options
- Performance awards
- Stock appreciation rights
- Cash awards
- Certain private-company awards
Employees can also use an associated Fidelity brokerage account to manage eligible shares and cash after an award pays out.
How Fidelity NetBenefits Fits Into the Process
Fidelity NetBenefits is generally the starting point for employees managing Fidelity-supported workplace stock plans.
After signing in, employees can find their stock-plan information and, depending on the employer’s arrangement, complete actions such as accepting an award or enrolling in an employee stock purchase plan.
The platform can also display information about:
- Current awards
- Vesting dates
- Number of shares or units
- Exercise opportunities
- Purchase periods
- Expiration dates
- Plan documents
- Tax information
- Available transactions
The information shown can vary according to the company’s plan. Employees should therefore use the plan documents available in their own account as the primary source for specific deadlines and conditions.
Restricted Stock Units Explained
Restricted stock units, or RSUs, are among the most widely used forms of equity compensation.
An RSU is generally an award of stock units that remains subject to restrictions until specific vesting requirements are met. The employer establishes the vesting schedule, which can be based on time, employment status or other conditions.
Once an RSU vests, the company generally delivers shares or, depending on the plan, a cash equivalent. Taxes may be withheld at that time.
For employees, the process usually looks like this:
- The company grants the RSUs.
- The employee accepts the award if acceptance is required.
- The employee waits for the scheduled vesting date.
- The award vests after the applicable requirements are satisfied.
- Taxes are withheld according to the plan and applicable rules.
- Remaining shares or cash are deposited into the associated account.
The value of an RSU can change considerably before it vests because the award’s value is generally connected to the company’s stock price.
Employee Stock Purchase Plans
Employee stock purchase plans, commonly known as ESPPs, allow eligible workers to purchase company shares using payroll contributions.
Employees generally enroll during a designated enrollment period and choose the amount or percentage of compensation they want to contribute. The money is accumulated during the offering period and used to purchase shares according to the company’s plan rules.
Some ESPPs provide a discount on company shares, while others may include additional features such as a lookback provision. Not every ESPP has the same structure.
After shares are purchased, they can generally appear in the employee’s brokerage account.
ESPP participants should pay attention to enrollment deadlines, contribution limits, purchase dates and the tax treatment that applies to their specific plan.
Understanding Stock Options
Stock options work differently from RSUs.
A stock option generally gives an employee the right to purchase company shares at a predetermined price, known as the exercise or grant price, after applicable vesting conditions are satisfied.
The employee does not automatically own the underlying shares when the option is granted.
A typical stock-option timeline includes:
- Grant of the option
- Acceptance when required
- Vesting
- Exercise
- Payment of the exercise price and applicable taxes
- Receipt of shares
- Sale or continued ownership of the shares
Stock options also have expiration dates. If an option expires before it is exercised, it generally cannot be used afterward.
This makes expiration dates particularly important for employees who leave a company or have options approaching the end of their exercise period.
Restricted Stock Awards
Restricted stock awards, or RSAs, provide actual company shares subject to restrictions and vesting conditions.
Unlike an RSU, which represents a unit that can later settle into shares or cash, an RSA generally involves stock that is subject to restrictions until the applicable requirements are satisfied.
Tax treatment can also differ from other forms of equity compensation. Employees with restricted stock should review their award documents carefully, particularly if an election such as an 83(b) election could be relevant.
Because tax rules can be complicated, employees may want to seek professional tax advice before making elections or taking actions that could create significant tax consequences.
Performance Awards and Stock Appreciation Rights
Some employers use performance awards as part of executive or employee compensation.
Performance awards may involve shares, units or cash and can depend on company-established performance goals. The eventual payout can differ from the original award depending on the plan’s performance conditions.
Stock appreciation rights, or SARs, are another type of equity compensation. They can provide an employee with shares or cash representing the increase in a company’s stock value over a specified period.
These awards can have conditions that differ significantly from standard RSUs or stock options. Employees should therefore avoid assuming that all equity awards follow the same vesting, exercise or tax rules.
Taxes on Employee Stock Compensation
Taxes are one of the most important considerations when dealing with workplace equity.
The tax event depends on the type of award and the action being taken. For example, RSUs are generally taxable when they vest, while stock options can create tax consequences when exercised. ESPPs can have different treatment depending on whether the plan is tax-qualified and when shares are sold.
Fidelity’s tax resources identify several common taxable events associated with workplace equity.
For RSUs, the value recognized at vesting is generally treated as ordinary compensation income. When the resulting shares are later sold, the difference between the relevant cost basis and sale price can produce a capital gain or loss.
Stock options require additional attention because incentive stock options and nonqualified stock options can have different tax rules.
Employees should not assume that the amount of cash received from a stock transaction represents the final after-tax amount.
How Tax Withholding Works
Employers commonly use withholding to cover taxes associated with certain stock awards.
Depending on the employer’s plan, withholding can involve:
- Selling some shares to cover taxes
- Withholding a portion of the shares
- Using cash from an eligible brokerage account
The available method depends on the award and the employer’s rules.
For an RSU, for example, an employer may withhold part of the shares when the award vests and deliver the remaining shares to the employee.
Employees should check their account and tax documents to understand how much was withheld and how the transaction was reported.
Why Cost Basis Matters
Cost basis becomes particularly important when company shares are sold.
For a traditional investment purchased with cash, determining cost basis can be relatively straightforward. Equity compensation can be more complicated because some of the value may already have been reported as compensation income.
When shares are eventually sold, the employee generally needs to determine the appropriate adjusted cost basis to calculate the taxable capital gain or loss.
Fidelity provides tax forms and supplemental information that can help employees identify the relevant figures.
Employees should compare their brokerage tax documents with employer-provided information before filing their tax returns. Errors in cost-basis reporting can potentially result in paying more tax than necessary.
Selling Company Shares
Once shares are available, eligible employees can generally sell them through their brokerage account.
The decision to sell may involve several considerations, including taxes, investment concentration, financial goals and the employee’s view of the company’s future prospects.
Employees who receive a substantial amount of company stock can become heavily exposed to the performance of a single business. If the company’s stock declines significantly, both employment income and investment assets could potentially be affected.
For that reason, some employees consider diversification when deciding what to do with vested shares.
There is no universal strategy that applies to every employee. The appropriate approach depends on individual circumstances, tax considerations, financial objectives and the terms of the stock plan.
What Happens When an Employee Leaves a Company?
Leaving an employer can have important consequences for outstanding equity awards.
The treatment of unvested RSUs, unexercised options and ESPP contributions depends on the employer’s plan documents.
Unvested awards may be forfeited when employment ends. Vested stock options may remain exercisable for a limited period, depending on the plan. ESPP contributions may be refunded if an employee leaves before the applicable purchase occurs, while shares that have already been purchased generally remain with the employee.
The rules can differ significantly between companies.
Employees who are planning to leave an employer should review their stock-plan documents before their final employment date. This is particularly important when stock options have approaching expiration deadlines.
Keeping Track of Important Dates
Stock compensation can involve several dates that should not be overlooked.
Important dates may include:
- Award acceptance deadline
- Vesting date
- ESPP enrollment deadline
- Offering-period start and end dates
- Stock purchase date
- Stock-option expiration date
- Exercise deadline after leaving employment
- Tax-reporting deadlines
Missing one of these dates can affect an employee’s ability to receive, purchase or exercise an award.
Keeping contact information current in NetBenefits can also help ensure that important notifications are received.
Managing Shares After Vesting
Once eligible company shares are deposited into a Fidelity brokerage account, employees generally have more flexibility in how they manage those assets.
Depending on the account and plan, employees can potentially:
- Hold company shares
- Sell some or all shares
- Transfer cash to a bank account
- Invest in other securities
- Review tax documents
- Add or update beneficiaries
- Monitor the overall account
The brokerage account can remain useful even after an employee leaves the company. Fidelity states that the account belongs to the employee, and eligible investment activity can generally continue after employment ends.
However, former employees still need to review the specific rules affecting outstanding company awards.
Fidelity Stock Plan Services and Financial Planning
For employees receiving equity compensation, the stock award is only one part of the overall financial picture.
A large equity award may affect decisions involving retirement savings, emergency funds, taxes, investment diversification and major purchases.
Employees may want to consider how company shares fit into their overall portfolio rather than viewing the stock-plan account in isolation.
The value of an award can rise or fall with the company’s share price, so the amount displayed in an account is not necessarily a guaranteed future payment.
Planning ahead can also make it easier to prepare for vesting dates, tax obligations and potential changes in employment.
Common Mistakes Employees Should Avoid
Several mistakes can create unnecessary complications when managing workplace equity.
Ignoring Vesting Dates
An employee may assume an award is available before it has actually vested. Checking the vesting schedule regularly can prevent confusion.
Forgetting Option Expiration Dates
Stock options are time-limited. An option that expires generally loses its value as an exercisable right.
Treating All Stock Awards the Same
RSUs, ESPPs, RSAs and stock options have different rules. Their tax treatment and transaction requirements can vary significantly.
Overlooking Taxes
The value shown in an account should not automatically be treated as the amount available after taxes.
Failing to Review Cost Basis
Incorrect cost-basis information can affect the amount of taxable gain or loss reported when shares are sold.
Concentrating Too Much Wealth in Company Stock
Employees should understand the investment risk of holding a large percentage of their assets in one company’s shares.
What Employees Should Check in Their Account
A regular review of a stock-plan account can help employees stay informed.
Among the most important items to check are:
- Current share and award balances
- Upcoming vesting dates
- Option expiration dates
- ESPP enrollment status
- Contribution levels
- Tax withholding
- Cost-basis information
- Available cash
- Plan documents
- Beneficiary information
The specific information available depends on the employer’s plan and the employee’s awards.
Final Takeaway
Fidelity Stock Plan Services provides a central platform for employees managing workplace equity compensation. Through Fidelity NetBenefits and related brokerage services, participants can track awards, monitor vesting, manage company shares and access resources covering taxes and financial planning.
The most important factor is understanding the specific terms of an employer’s plan. RSUs, ESPPs, stock options, restricted stock and performance awards can all work differently, and their tax consequences can vary as well.
Employees should pay close attention to vesting schedules, enrollment periods, expiration dates, withholding information and cost basis. Reviewing plan documents before exercising options or selling company stock can also help prevent avoidable mistakes.
For significant transactions or complicated tax situations, consulting a qualified financial or tax professional can provide guidance based on an individual’s circumstances.