A restricted stock unit (RSU) is a form of equity compensation used by many high-tech companies and wall street firms. RSUs grant an employee interest in company stock but have no tangible value until they are vested. To encourage and reward employees stay with a company long term, employer will set up conditions for distribution of these granted stocks. The conditions can be performance milestones or length of time with the employer. Each RSU award will come with a vesting schedule detailing the number of shares to be released and date of release. Usually an RSU award will take 3 to 4 years to be fully vested. If employee leaves the company prior to full vesting, all unvested (still restricted) stock units will be forfeited.
To accept RSU as qualified income, all mainstream banks require minimum 2 years history of receiving vested RSU from same employer plus evidence of next 3 year’s continuation of future vesting.
At SMB, we accept RSU as qualified income with less than two years vesting history
- YTD paystub documenting current year’s total RSU distribution
- Copy of RSU award plan
- Copy of vesting schedule detailing the past and future release
RSU income calculation:
- With 2 years vesting history
(total units vested in the past 24 months X average stock price in the last 12 months) / 24 months = monthly RSU Income
- Less than 2 years vesting history
(total units vested in the past 12 months X average stock price in the last 12 months) / 24 months = monthly RSU Income