The Washington Nonqualified and Incentive Stock Option Plan is an employee benefit program offered by Intercargo Corp., a Washington-based company. This plan provides employees with the opportunity to purchase company shares at a predetermined price within a specified time frame. The nonqualified stock options (Nests) under this plan are typically granted to employees as a form of compensation outside the regular salary structure. These options offer employees the right to purchase company stock at a predetermined price, known as the exercise price or strike price. The exercise price is usually set at or above the current market price of the company's stock, ensuring that employees can benefit from any potential future stock price appreciation. In contrast, the incentive stock options (SOS) offered by the plan provide additional tax advantages to employees. SOS are granted with a predetermined exercise price, but they also come with certain restrictions and conditions. Employees who exercise SOS may qualify for favorable tax treatment, such as the potential for long-term capital gains tax rates upon the sale of the stock. Intercargo Corp. may offer different types of Washington Nonqualified and Incentive Stock Option Plan to cater to the various needs and preferences of their employees. Some possible variations or additional plan options may include: 1. Restricted Stock Units (RSS): These grants represent a promise to deliver company stock at a future date, typically subject to certain restrictions and vesting requirements. Employees receive the stock units upon reaching specified performance goals or remaining with the company for a predetermined period. 2. Performance Stock Units (Plus): These grants are tied to specific performance goals and are awarded based on the achievement of pre-established targets. Plus promote alignment between employee performance and company success, as they only convert into actual stock units when the set targets are met. 3. Stock Appreciation Rights (SARS): Instead of offering the right to purchase company stock at a predetermined price, SARS provide employees with a cash or stock payment equal to the appreciation in the company's stock price over a specified period. SARS align employee incentives with the company's stock performance without the need for stock ownership. 4. Employee Stock Purchase Plan (ESPN): This plan allows eligible employees to regularly contribute a portion of their salary to purchase company stock at a discounted price. ESPN are typically offered as a long-term savings and investment opportunity, enabling employees to acquire company stock at a favorable price over time. Intercargo Corp.'s Washington Nonqualified and Incentive Stock Option Plan provides employees with valuable opportunities to participate in the company's growth and financial success. By offering different types of stock-based incentives, the company aims to attract, retain, and motivate talented individuals while aligning their interests with the company's long-term objectives. The specific details and terms of the plan may vary based on individual employee eligibility and the company's overall compensation strategy.
Washington Nonqualified and Incentive Stock Option Plan of Intercargo Corp.
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Under a standard four-year time-based vesting schedule with a one-year cliff, 1/4 of your shares vest after one year. After the cliff, 1/36 of the remaining granted shares (or 1/48 of the original grant) vest each month until the four-year vesting period is over. After four years, you are fully vested.
To receive the incentive, you must hold (keep) ISOs for at least one year after exercise and two years after the grant date. If you hold your stock for at least a year after purchase, you will pay the lower capital gains tax rate on the increase in value.
An incentive stock option (ISO) is a corporate benefit that gives an employee the right to buy shares of company stock at a discounted price with the added benefit of possible tax breaks on the profit.
As long as the total value of exercisable options that vest in a given tax year does not exceed $100,000, the employee won't surpass the ISO $100K limit. This is one reason why it's important to pay attention to the vesting period outlined in the option grant.
There are many requirements on using ISOs. First, the employee must not sell the stock until after two years from the date of receiving the options, and they must hold the stock for at least a year after exercising the option like other capital gains. Secondly, the stock option must last ten years.
Non-qualified stock options are more straightforward, as the tax implications at exercise are generally agreed to be easier to understand. Incentive stock options, while more complicated, offer the opportunity for long-term capital gains if you meet the requisite holding period requirements.
Vesting: ISOs usually contain a vesting schedule that must be satisfied before the employee can exercise the options. The standard three-year cliff schedule is used in some cases, where the employee becomes fully vested in all of the options issued to them at that time.
Other employers use the graded vesting schedule, which allows employees to become invested in one-fifth of the options granted each year, starting in the second year from the grant. The employee is then fully vested in all of the options in the sixth year from the grant.