Performance Stock Grant Type:
Performance Stock Awards (PSAs)
A Performance Stock Award (PSA) is a grant of stock that pays out when a participant achieves the related Performance Goal. PSA grants are usually awarded to an individual at par value or $0. The shares are issued in the name of the participant and held in escrow until contractual restrictions lapse or the performance goal is reached. The individual has the rights of a shareholder and is entitled to vote and can receive dividends.
Taxes on a performance award can be set to when it is granted (Tax @ Grant) or when the performance award vests (Tax @ Vest). In addition:
- PSAs are issued at grant, however
PSAs vest on the Status Date of the Status Complete record for the associated Goal. Once they vest, the participant can receive the shares.
- It is possible for the number of actual shares received by the participant to vary. There are two primary reasons for this fluctuation: the actual payout on the Performance Goal varied from what was originally established. This typically occurs when performance is higher than what was delineated in the Goal. Second, if a participant spends any amount of time away from the Goal during the performance period (for example, a Leave of Absence), this would detract from their performance towards the goal, possibly resulting in a decrease in the actual shares receivable.
- For U.S. only, PSAs fall under IRS rule 83(b) elections (tax at grant) or can be taxed at vest. PSAs are generally taxed at vest. PSAs cannot be tax-deferred.
Performance Stock Units (PSUs)
Performance Stock Units (PSUs) are considered a guarantee to deliver shares when the participant reaches the related Performance Goal. A PSU is a grant of units given in terms of company stock to an employee or a director. PSUs vest only if one or more pre-determined Performance Goals have been achieved. The participant does not own the shares until vesting. These restrictions apply:
- PSU grants vest and can be issued on or after the Status Date when the associated Goal is marked as complete.
- It is possible for the number of actual shares received by the participant to vary. There are two primary reasons for this fluctuation: the actual payout on the Performance Goal varied from what was originally established. This typically occurs when performance is higher or less than what was delineated in the Goal. Second, if a participant spends any amount of time away from the Goal during the performance period (for example, a Leave of Absence), this would detract from their performance towards the goal, possibly resulting in a decrease in the actual shares receivable.
- PSUs are generally taxed at vest unless the individual makes a deferral election which postpones the tax event (only Income taxes are deferred) at time of release. As a result, PSU grants can be tax-deferred.
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