Double Trigger RSUs at Lyft
My job at Lyft includes ~$320k in RSUs vesting over 4 years. I just realized that Lyft has a "double trigger" vesting system, so the RSUs don't fully vest until both the vesting cliffs have been reached (time) and there has been some sort of performance based targets (acquisition / IPO). The internal rhetoric is that this is for our convenience and to help the employees. I honestly don't know enough about the setup to understand what the trade offs are between this double trigger (which they are claiming is the bees knees) and any regular time-only vesting schedule. Any insight?
If they didn’t have a double trigger, you’d owe income tax on the RSUs at vesting time. And you likely wouldn’t be able to pay it. So, it’s pretty much a necessity
A fun fact is that you have seven years from your grant date for the double trigger to fire otherwise you lose all your shares if you’re no longer at the company
This is a pretty bullshit policy. The result is: 1. It’s harder for you to leave. Technically the way it’s written they could just deny you all of your RSUs if you leave before IPO even if you meet the time requirement. 2. It saves you tax now but means that all appreciation in lyft stock value becomes income rather than capital gains. This means your grant is worth ~20% less because of the higher tax rate in the long run. 3. The right way to do this is to allow RSUs to vest with a tax event and then have the company offer to buy back just enough RSUs to give you the cash needed to pay the IRS. The reason Lyft doesn’t do this is that it costs them more cash so instead they shift that burden to you. This is what Dropbox did preipo when I was there. 4. The new tax law actually allows employees of private companies to simply elect to defer taxes from RSU grants so this whole scheme is unnecessary now but continued because it locks in employees.
Assuming that you would sell a portion of RSUs to pay the tax, I don’t think #2 is accurate. You either lose 40% now or 40% later. But if you pay it now, you then ALSO pay capital gains on appreciation, so it may even be worse
Yes but what I mean is: Say you vest 100k of RSUs. You owe 40% or 40k for tax. So you sell enough shares to cover it. Now a year later the stock doubles. Your stock is now worth 120k. You sell and owe 20% capital gains on the appreciation, or 12k. You end up with net 108k. On the flip side, say your RSUs were deferred until the end. Then they would be worth 200k and you’d owe 40% = 80k tax. You net 120k. In this example you save 12k by having taxes deferred
there's a lot of misinformation in this thread. instead of listening to ignorant people in the internet I suggest you attend the RSU information session Lyft offers us and / or ask your questions to the stock plan folks. they are there to help. the double trigger is *only* a good thing. it just means our RSUs only become valuable (read: taxable) once you've 1) vested and 2) there's been a liquidity event like and IPO or acquisition (read: once they have tangible value and can be sold)
It’s common for companies to have a time window after IPO, during which common stocks can’t be sold. Your second trigger is probably just that.