- Q. How does a stock appreciation right differ from a stock option?
- A. A SAR is very similar to a stock option, but with a key difference. When a stock option is exercised, an employee has to pay the grant price and acquire the underlying security. However, when a SAR is exercised, the employee does not have to pay to acquire the underlying security. Instead, the employee would receive the appreciation value of the underlying security, which would equal the current market value less the grant price.
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- Q. Can I decide whether I receive cash or shares when I exercise?
- A. Depending on the rules of your plan you may be able to decide how you receive your proceeds (cash, shares, or a combination of cash and shares). Check your plan rules for details. Your plan also determines when you may make your election. Depending on your company's plan, you may be able to make your election when you exercise.
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- Q. How do I use the Fidelity Account?
- A. Your Fidelity Account is a comprehensive brokerage account offering online trading, cash management features, investment guidance, and planning tools. Use your Fidelity Account as a gateway to investment products and services that can help meet your needs. Learn more.
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- Q. What happens to my SARS if I retire?
- A. If you retire, you can typically hold your vested outstanding exercisable SARs. Often the expiration is accelerated, so you may have limited time to exercise. See your employer's plan rules for details.
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- Q. What happens to my SARS if I leave the company?
- A. There are special rules in the event that you leave your employer, although generally the expiration is accelerated. See your employer's plan rules for details.
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- Q. What happens to my SARS if I die?
- A. Typically, your vested SARs would be transferred to, or are exercisable by, your designated beneficiary, and the plan will generally set the expiration date. See your employer's plan rules for details.
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- Q. How can I model different exercise scenarios for my SARS?
- A. There is a modeling tool available on your Stock Appreciation Rights Summary Screen. Click on the Estimate Gain link next to the grant that you would like to model. This will take you to a tool that will allow you to estimate the gain if you exercised a specific number of shares or tell you how many shares you need to exercise in order to receive a specific amount of cash or shares. The tool can also help you to estimate the potential taxes you may owe from an exercise.
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- Q. Do SARS pay dividends?
- A. Generally not, although details are set under each company's plan. Dividends are generally not paid on unexercised SARs.
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- Q. What are the tax implications of SARS?
- A. There are no U.S. federal income tax consequences when an employee is granted SARs. However, at exercise an employee will recognize compensation income on the fair market value of the amount received at vesting. An employer is generally obligated to withhold taxes. Depending on the rules of an employee's plan, the employer may satisfy that withholding obligation by withholding cash or shares. The remaining net proceeds will be deposited into a brokerage account. If an employee receives net shares and sells them at a later point, the appreciation in value of the shares from the time of exercise to the time of sale will be treated as a capital gain or loss. Whether it is a long-term or short-term gain or loss will depend on how long the shares are held.
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- Q. What is the alternative minimum tax (AMT)?
- A. The Alternative Minimum Tax (AMT) is a tax system which complements the federal income tax system. The goal of the AMT is to ensure that anyone who benefits from certain tax advantages will pay at least a minimum amount of tax. For more information about how the AMT may affect your situation, contact your tax advisor.
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