You’ve left your job, but you forgot to exercise your options before you left. Can you still exercise them?
When employees are terminated or leave their company, they may have options that are vested and that they can exercise, but never got around to purchasing. There is often a misconception that these employees who haven't bothered to exercise shares before their termination date can't exercise the shares after they've left the company. This is incorrect.
A 90 Day Window
There is usually a 90-day window (3 months) for an employee to exercise shares granted under a stock incentive plan after they’ve ended their employment.
Does This Apply to You?
To determine if you have a 90-day window, there are a few considerations:
Were you granted options under a plan?
Have the options vested as of your last day of service?
Were you terminated “for cause”?
What does the plan specify as the number of days you have to exercise after employment has ended?
It doesn’t matter if you resigned or the company terminated you, unless you were terminated “for cause.” If the stated reason for the termination was egregious behavior or serious misconduct like falsifying records, stealing, threatening behavior, or extreme insubordination, then you may have been terminated “for cause,” in which case the 90-day window may not apply.
90 days is overwhelmingly the standard post-termination exercise period, but you'll need to verify the time window for your company by talking to the appropriate representative or checking the Stock Incentive Plan language.
Why 90 Days?
For incentive stock option grants (ISOs), the IRS requires employee status within three months of the exercise, which probably explains how 90 days became the widespread norm. However, a tight window arguably benefits employees who have the financial means to make a stock purchase in short order as they depart, so some companies have taken measures to extend the window for their employees for an even longer period.
The countdown clock runs from the date of separation, so you'll have to know the date of your departure, check the Stock Incentive Plan terms, and then do the math to see how much time is left in the window.
As an employee, you should realize that even if you’ve left the company, hope may not be lost in terms of retaining the equity you’ve earned. If you are in the 90-day window, you can still buy shares!
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