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Employer Stock: NQSOs
Employer Stock: NQSOs

This article describes how to enter NQSOs in your Plan.

Nancy Gates avatar
Written by Nancy Gates
Updated over a week ago

Employer Stock Options

These instructions refer to employer stock options that are exercised upon vesting. When NSQOs vest the difference between the exercise price and the underlying stock price incurs FICA and income tax at your ordinary tax rate and generally reported on a Form W-2. For this reason, we recommend adding the gross income from NQSOs (generally NQSO difference between the grant price and the FMV) as an income stream on the vesting date by selecting the same start and stop age.

The NQSOs will incur Capital Gains tax when they're withdrawn. For this reason we recommend creating an after-tax account with the Capital Gains tax treatment, and adding a contribution to account for the value of the NQSOs.

STEP 1: Add an income stream

  • Head over to My Plan > Income > Work

  • Press Add a job ➕

  • Give the job a descriptive name, “ACE Employee NQSO,” for example.

  • Add an income stream to represent the gross income from the NQSOs on the vesting date by selecting the same start and stop dates.

STEP 2: Add a savings account

  • Navigate to My Plan > Accounts and Assets

  • Press Add an account ➕

  • Select Investment/Savings/Checking account

  • Select manual entry

  • Give the account a descriptive name, "ACE Employee NQSO," for example

  • Enter $0 for the balance

  • Select Capital Gains as your tax treatment

  • Enter the $0 for the Cost Basis

  • Enter 0 for the turnover rate

  • Select your optimistic and pessimistic rates of return

  • Exclude the account from your withdrawal strategy

  • Head over to Money Flows and add a contribution ➕ and enter the value of the NQSOs

  • Select the same start and stop age for the contribution

* You also have the ability to make the contribution directly from the income stream into the after-tax account.

If you receive extra shares, you may wish to add those to the account as a Windfall. Head over to My Plan > Income > Windfalls

  • Press Add a windfall ➕

  • When asked "Which account do you want to model a contribution to?" select the new NQSO account

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