I think it's healthy to just let vesting mean you get to take it with you, period, no catch. But it's worth noting this means there will be fewer options returned to companies in comparison to the last boom. Scott Kupor made this point although he framed it in a poor way.[1] He notes that it will in theory result in more dilution for employees that stay.
This sounds great in concept but in practice acquiring the shares is the taxable event. So if a company just gives you shares, that's the taxable event. And since you get taxed on the delta between your strike price and the "fair market value" (even though there isn't one), it would happen on the company's schedule, not your own.
If you extended the exercise window for N years, that would mitigate most of it because you could wait to execute until it's liquid. Or not execute at all if it goes under.
* I've been through two IPOs in the last couple years.. good planning shielded me from having major tax liabilities.
Unless they put them in your 401k, which is exactly what many (most?) companies do.
I have company stock given to me in my 401k.
https://www.fidelity.com/viewpoints/personal-finance/company...
>More than 15 million people own about $400 billion of company stock in Fidelity-administered workplace retirement plans alone
Though I've been at both companies pre-IPO so that is probably the first distinction. Post-IPO, the rules are quite a bit different so maybe it's an option now..
But, yes, as pointed out, you do pay taxes, but ONLY when withdraw from it, which you can do without a penalty when you reach a certain age. The capital gains are tax free. But I was saying distributing stock into a 401k is not a taxable event, not that you'd never pay taxes.
It's not abusive to fill up your 401k, that's what it is there for.
We agree. That's all I meant by "you get to take it [your vested options] with you," as opposed to turning them in on the way out the door if you can't pay the strike price + AMT.