How Mariner Wealth Advisors Approaches What Happens to RSUs When You Quit

What happens to RSUs when you quit 10 weeks before a vest?

If you quit 10 weeks before a vest, the unvested RSUs are usually forfeited on your last day, including the tranche about to vest. You receive nothing for them unless your plan has a retirement clause or the new employer replaces the value. Forfeiture follows the termination date in each award agreement.

Hypothetical: Natalie holds $600,000 of unvested RSUs at today's price, split into three tranches: $200,000 in 10 weeks, $250,000 next year and $150,000 the year after. The competitor offers a $450,000 make-whole RSU grant vesting in thirds over three years, plus a $100,000 cash sign-on bonus she must repay if she leaves within 24 months. That is $550,000 of replacement. Starting in 4 weeks, she forfeits $600,000, so the shortfall is $50,000 ($600,000 − $550,000).

If she moves her start date past the 10-week vest, she keeps $200,000 and forfeits $400,000. New employers often resize a buyout to what is actually forfeited. If they cut the make-whole to $300,000, she gets $400,000 of replacement ($300,000 + $100,000) against $400,000 forfeited, and the gap is $0, not $50,000.

All figures are pre-tax and at today's prices. RSUs at both employers are taxed as ordinary income when they vest, so comparing the two packages before tax treats them equally. The replacement is paid in a different stock with its own price risk. Any share price can fall, and you can lose money, so the make-whole could end up worth less than its grant value.

Do unvested RSUs keep vesting if you leave after reaching retirement eligibility?

They can, but only if your plan has a retirement clause and you meet its definition. That definition is usually an age plus years of service set in the plan document, for example age 55 with 10 years. Read the exact test in your own grant.

Many retirement clauses exclude people who leave to join a competitor, or they cancel continued vesting if you breach a noncompete. A resignation to a rival can therefore fail the test even at the right age.

There's a tax wrinkle too. Under the special FICA timing rule, Social Security and Medicare tax can be due in the year you become retirement eligible, because that is when the risk of forfeiture lapses. Income tax still waits until the shares are delivered.

Natalie, at 51, shouldn't assume she qualifies. She needs to confirm the age and service threshold in her plan document before she counts on a dollar of it.

Older grants, newer terms

Each annual grant carries its own award agreement. A grant from five years ago can have stricter forfeiture or noncompete language than last year's, so read every agreement, not just the most recent one.

Many companies have added continued-vesting provisions for retirees in newer grants. A plan you made years ago around a cliff forfeiture may now understate what you keep.

SEC rules now require listed companies to keep clawback policies for current and former executive officers' incentive pay after an accounting restatement. Performance-based awards and PSUs can be covered, which matters for a CFO who leaves.

A court blocked the FTC's attempt at a nationwide noncompete ban. Whether a forfeiture-for-competition clause holds up still depends on your agreement and your state's law. An employment attorney in your state can tell you how courts there treat these clauses.

The resignation calendar

We sequence the steps before anyone picks a date: confirm the termination-date definition, map the vest dates, sign the offer letter, give notice, then work the last day.

The post-departure restriction matters for a CFO who held material information on the way out. An existing 10b5-1 plan may need to be ended or changed, and a new plan starts a fresh cooling-off period.

• Before you sign: pull the vest schedule and negotiate the buyout.
• Notice date: you tell your employer, and the clock on your start date begins.
• Any vest before your last day: the tranche is yours.
• Last day: unvested RSUs are forfeited.
• After you leave: the insider trading policy may restrict sales until the next open window.
• January: the old employer's W-2 includes RSU income from the final vests.
• April: your return shows whether withholding on those vests was enough.
• 12 to 24 months after your start date: the sign-on repayment window closes.

Can you reverse course once the last day is set?

Before you sign the offer, almost everything is negotiable, but after your last day the forfeiture is permanent. The window to change terms is usually days to a few weeks. Rehire rarely restores cancelled RSUs.

You can negotiate the start date, the size of the buyout, the vesting speed of the make-whole and the repayment terms. After you give notice, a start date can sometimes still move. But forfeiture on the termination date can't be undone.

Buyout terms are fixed by the signed offer letter. If the make-whole is described as 'up to' or 'subject to committee approval', get the final number in writing before resigning.

Questions for HR and the equity plan administrator

Which items should you check before you resign? This checklist covers the six documents and terms that decide the size of the gap.

Ask HR four things: how the plan defines your termination date, whether you meet the retirement clause, what clawback or noncompete terms apply to vested shares, and the exact date and value of your next vest. Some answers should worry you: 'termination date means the date notice is given', 'the committee decides retirement treatment case by case', and 'vested shares can be recovered if you breach the noncompete'.

Ask the custodian whether vested shares must be moved out of the plan account after departure, and what transfer form it requires. Some plan accounts close or charge fees once you're no longer an employee.

We use one test with every executive weighing an offer. Suppose a vest worth more than one month of your salary falls within 90 days of your proposed last day. Before signing, request a later start date or a buyout that includes that tranche. For Natalie, the $200,000 tranche 10 weeks out passes that test easily.

Two smaller mistakes tend to arrive together. A last day set a few weeks before a $200,000 vest forfeits that tranche, and a $100,000 sign-on bonus repayable within 24 months adds a second exposure. If the new role ends in month 18, hypothetical Natalie is out $300,000 of pre-tax pay: $200,000 forfeited plus $100,000 repaid. A repaid bonus generally goes back gross, with any tax relief coming later through claim-of-right rules.

• How does the plan define the termination date?
• Does any vest fall before it?
• Does the retirement clause apply to a resignation to a competitor?
• Are vested shares subject to any forfeiture-for-competition or clawback provision?

Does leaving change what a spouse or heirs would receive?

Yes. Many plans accelerate unvested RSUs on death or disability while you are employed, and the day after your last day that protection on the old grants is gone. The new employer's death terms may differ, so compare them before you sign.

A sign-on repayment hits household cash, not just the executive's. A $100,000 repayment in month 18 is a real household liability, and a spouse working part time, like Natalie's husband the architect, should know about it before the offer is signed.

Shares moved to a new brokerage account need a fresh beneficiary or transfer-on-death designation. The old plan's designation does not follow the shares to a new custodian.

The first documents Mariner Wealth Advisors opens

Mariner Wealth Advisors lines up each grant's vest dates against the proposed start date to see what a few weeks of delay would keep. It then looks at the vested low-basis shares, $1.3 million of Natalie's $3.2 million net worth. Leaving usually ends the old ownership guideline, and selling those shares in stages becomes a diversification question, with a capital gains cost Mariner Wealth Advisors estimates before any sale. Our work here ties into concentrated stock planning and tax-efficient investing.