Stock Awards

Restricted Stock Units

For many employees, stock awards can be a significant portion of total compensation. You may receive these awards upon being hired, as a part of your annual compensation package, or as a special award.

These awards come in the form of Restricted Stock Units (RSUs). These RSUs become available to you as they vest over time. As the stock shares vest, you are taxed at ordinary income tax rates based on the total value of the vesting shares of stock.

Oracle directs your custodian to sell some of the vesting shares in order to withhold funds for taxes. This amount is sent to the IRS on your behalf. As a result, you will only receive a portion of the shares that have vested in your brokerage account. If shares are held for over a year after they vest, any potential gains from the time the shares have vested will get preferential long-term capital gains tax treatment. However, there is nothing that can be done to defer the taxable income generated by vesting shares of stock.

Most RSUs vest every three months starting in February (which you can remember using the acronym FMAN: February, May, August, November). These stocks vest at the end of each month. Oracle’s Review awards (similar to “Refresher” awards at other companies) follow this schedule. Eligible employees may receive Special Stock Awards /Leadership Awards. The vesting schedule for these shares varies from other RSUs you receive. These awards vest mid-month in March-June-September-December.

Typically, employees let their stock grants accumulate in their investment accounts while covering expenses through their salaries. We encourage you to flip this thinking. By living off of vesting shares of stock, you gain cash-flow flexibility and can then take advantage of the many tax-preferred benefits available to you. Restricted Stock Units vest multiple times per year and vary significantly in amount each time. We can work with you to organize and plan your cash flows in order to implement many of these tax-saving strategies.

401(K) Plan

Contribution Matching

Oracle matches 50 percent of the regular contributions you make into your 401(k) account. The total amount you can contribute in 2022, is $20,500 if you are under 50 years old. For individuals 50 and older, you can contribute $27,000. We encourage you to make the most of this by maxing out your 401(k) contributions before utilizing any other benefits available to you. There is no vesting period for Oracle matching contributions. Employees can contribute up to 65% of their compensation to their 401(k).

After-Tax Roth Conversion (Mega Backdoor Roth Conversion)

This benefit is relatively new in the 401(k) world and many employees are simply unaware of it. This feature allows you to make additional after-tax contributions to your 401(k) to make up the difference between your contributions Oracle’s matching contributions, and the annual federal 401(k) contribution limit. These contributions are then converted to tax-free Roth dollars on a continuous basis. By taking advantage of this benefit, you can contribute over four and a half times the typical Roth IRA annual limit and build a nice nest egg of tax-free dollars.

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