Many companies offer equity compensation programs to attract, motivate, and retain top talent while conserving cash and aligning the interests of the employees and shareholders. While these incentive programs provide a great benefit, they must be carefully managed to avoid upsetting your financial strategy or posing a significant tax burden. Below we discuss two of the most common stock option plans that we help our clients understand and maximize.

RSU – Restricted Stock Units

As an employee, you may receive a Restricted Stock Unit (RSU) grant as part of your annual performance assessment or generally as part of your overall compensation package. The majority of RSUs have a vesting schedule, so you don’t receive the full value from the outset (Your employer wants to schedule vesting over a period, rather than all at once, to retain your services!). For example, if your company grants you 400 RSUs, you’ll probably get 100 shares to vest each year (typically on a quarterly schedule) until you vest all 400 shares, at which time you may receive a new grant.

RSUs give you an interest in the company but no actual value until they are vested. Upon vesting, the Fair Market Value (FMV) of the shares is considered income. You will then have the right to sell the vested shares and receive the cash proceeds or hold the shares for a longer period.

Regarding Taxes

Your income will include the FMV of the shares as they vest. You can sell your vested shares and convert them to cash. Alternatively, you may keep the shares, but any gains made after the vesting date would be taxed as capital gains when you sell. If you hold shares and they drop in value, you might be faced with selling those shares at a loss, while paying tax on vesting date FMV you never actually received.

Your employer typically handles your tax withholding at the vesting date by selling enough shares on your behalf to cover the estimated tax liability and distributing the remainder to you. The IRS requires a statutory 22% withholding rate. Because your vested RSUs influence your taxable income, and effective tax bracket, your employer’s tax withholding rate may not be enough.

Strategy

RSUs accrue over time and, if held, can lead to a significantly consolidated position in one firm. An experienced executive might start with 100 shares vested, then 200, then 300, and so on. Suddenly, they discover that a sizable chunk of their holdings, perhaps also a significant percentage of their net worth, consists of company stock.

Accumulation of company stock can lead to more than just lack of portfolio diversification. Generally, having a sizable stock position in the same company that also pays your salary isn’t advisable. If that organization, for a myriad of reasons, experiences a downturn this could have a double-whammy effect.

As a result, it may be advisable to sell all RSUs as they vest. There should be no additional taxes owed, because your costs basis will be the FMV at which you received the stock. In fact, keeping RSUs as they vest is the exact same thing as taking each cash bonus and investing it 100% in your company stock. If you wouldn’t do that, you shouldn’t hold all of your RSUs. By converting the shares to cash you will be better able to manage taxes due and invest proceeds in a more diverse manner. This should provide you with greater and more predictable long-term success.

March is National Nutrition Month!

This dedicated span of time encourages us to spotlight the significance of nutrition and healthy eating, recognizing this as a core pillar to both mental and physical well-being. I’m excited to dive into a topic that holds a special place in my heart – metabolic health. See below an introduction, as we explore how choices we make in dietary habits play a crucial role in shaping metabolic well-being – and what that even means!

The human body is intricately detailed and complex, similar to a car. While many of us don’t comprehend a car’s inner workings, we can sense when something is “off” and impacting optimal functionality. Similarly to a check engine light flipped on, there are many cues the body gives that it’s utilizing food for fuel less than optimally, such as the following: cravings, weight struggles, energy slumps, relentless fatigue, etc. Sadly, many of us have ignored these signals for too long.

The engine of the car is likened to the body’s metabolism. Just as the engine converts fuel into usable energy so the car can operate, being in good metabolic health ensures our body is able to generate and process energy efficiently to sustain life.

What factors determine metabolic health, you may wonder?

Clinically, it hinges on five specific and measurable factors¹:

1. Abdominal obesity (>40” around waist in men, >35” around waist in women)
2. Impaired fasted blood sugar (100 mg/dL or higher)
3. High blood pressure (130/85 mm/Hg or higher on multiple occasions or on medication for high levels)
4. High triglycerides (type of fat; 150 mg/dL or greater or on medication for high levels)
5. Low “helpful” cholesterol (HDL) levels (<40 mg/dL for men, <50 mg/dL for women)

According to the recent study published in the Journal of American College of Cardiology in July 2022, it’s estimated that only ~7% of adult Americans adults have optimal metabolic health, leaving 93% with markers in unhealthy ranges².

Each marker out of range increases the risk for development of complications like heart disease, Type 2 Diabetes, or stroke. Three or more out of range is considered metabolic syndrome. Getting an annual physical exam and bloodwork empowers your healthcare provider to evaluate your risk for metabolic syndrome. The good news is that lifestyle choices highly influence the health of these markers – namely eating a balanced diet and shunning a sedentary existence as two very practical realms to target.

Balanced Diet

Nutritionally, a balanced diet revolves around diverse, nutrient-rich whole foods while limiting processed items. A simple example of this would be choosing an apple (whole form) as opposed to apple sauce or apple juice, as often as is doable. This is due to the quality of nutrients the whole form contains as opposed to added processing.

When it comes to energy, the body’s preferred fuel source is glucose (think of this like gasoline), which comes from eating carbohydrates (carbs). In simplest terms, when we eat foods containing carbs, our blood sugars rise (as we expect). In those with good metabolic health, the body efficiently takes that glucose and converts it into usable energy and blood sugar levels are returned to normal through a process of hormonal “checks and balances”.

Conversely, poor metabolic health impedes glucose being used for energy efficiently, but rather leaves it in the blood stream, hence the term “high blood sugar”. When levels are high in the moment, you may experience the check engine symptoms listed above. Over time, chronically elevated blood sugar levels can lead to conditions like Type 2 Diabetes. When it comes to managing blood sugar levels – a quick tip you can implement today is the principle of “no naked carbs”.

No Naked Carbs

Clothing your carbs so they’re not “naked” means simply to pair a carb food with a protein or fat source to promote a steadier blood sugar response and limit a “spike” which may result from eating a carb only. Some examples would be peanut butter with a banana, cheese with crackers, or a hard boiled egg with grapes. This is just one simple tip to promote keeping your “engine” in tip-top shape, which will keep your body operating more efficiently in the moment and the long haul.

Sedentary Lifestyle

A sedentary lifestyle can be described as one marked by excessive sitting, lying down, and not engaging intentionally in physical activities that would increase heart rate or test muscle tone. For many Americans, especially depending on time of year and where one lives, this can include commute time to work, working from home sitting in front of a computer for most of the day, television watching, video game playing, etc.

Lack of movement, especially after eating food, can be disadvantageous for metabolic health as it can promote an “insulin resistant” state. Movement, like exercise (as simple as walking at a brisk pace or weight lifting) can promote “insulin sensitivity” which allows the body to utilize the incoming sources of foods more efficiently. The U.S. Department of Health and Human Services recommends the American adult to engage in physical activity categorized as moderate-intensity of 150 minutes per week and optimally 2 days of muscle strengthening, also³. This helps not only with metabolic health, but weight maintenance, mood, increasing “helpful” cholesterol (HDL), increasing creativity and promoting longevity, among many other benefits.

No matter where your starting point is, it’s time to get moving!

Let’s get your engine in check!

This introductory overview offers a flyover look into the intricacies of metabolic health, distinguishing between manifestations and potential risks. I hope you are encouraged that lifestyle factors like what you eat (good nutrition) and how much you move (exercise) can greatly reduce your risk for chronic disease, keeping your “engine” operating efficiently. By fostering awareness of the importance of metabolic health, we can be proactive in our approach to reducing risk factors. Time to take a look “under the hood” of your car!

732 E. McMurray Road, McMurray, PA 15317

From rebate checks to small business support, there is quite a bit packed into the Coronavirus Aid, Relief, and Economic Security (CARES) Act that was signed into law on Friday. The $2+ trillion emergency fiscal stimulus package is intended to mitigate some of the economic effects caused by the COVID-19 outbreak.

We have all been working to gain an understanding of the law so that we can act as a resource for our friends and family looking to take advantage of the applicable provisions. We have been reading numerous articles, participating in webcasts hosted by industry experts and large accounting firms, and talking with banks to understand the process for various provisions. New information is still coming out daily, but please do not hesitate to use us as a resource as we work through this pandemic.

Here is a look at some of the key provisions in the CARES Act that may be of interest to you:

1. A check – Based on income and family makeup, most Americans can expect to receive $1,200 individually ($2,400 for joint filers) and $500 per dependent. Amounts phase out for those who reported adjusted gross incomes over $75,000 for individuals and $150,000 for joint filers in 2018 or
2. A buffer – The CARES Act eliminates the 10% early withdrawal penalty for coronavirus-related distributions from retirement accounts. Withdrawn amounts can be repaid to the plan over the next three years. In addition, required minimum distributions (RMDs) are waived for 2020. Investors who have already taken an RMD for 2020 have options that may include returning the amount or rolling it over, as long as the distribution was not made from a beneficiary
3. Support for small businesses – In the form of more than $350 billion, including forgivable loans (up to $10 million) to help keep the business afloat, a paycheck protection plan and
4. Expanded unemployment benefits – Unlimited funding to provide workers laid off due to COVID-19 an additional $600 a week, in addition to state benefits for up to four months. This includes relief for self-employed individuals, furloughed employees and gig economy workers who have lost work during the
5. Fortified healthcare – $100 billion is allocated to hospitals and other health providers to help offset costs and provide relief. In addition, the legislation provides funding for numerous other areas including state and local COVID-19 response measures, an increase to the national stockpile for medicine, protective equipment, medical supplies and additional FEMA disaster relief
6. Enhanced education – $30 billion to bolster state education and school funding, as well as the deferral of federal student loan payments through the end of September.

What’s next? Treasury Secretary Steven Mnuchin has targeted early April to deliver the funds. Discussions are starting in D.C. around a possible next phase of economic relief, although it’s just talk for now.

We’ll continue to keep you updated with relevant and timely information. In the meantime, please don’t hesitate to reach out. These are difficult times in which we are living, but we are confident that we will get through them together.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Confluence Financial Partners is not a registered broker/dealer, and is independent of Raymond James Financial Services. Investment Advisory Services are offered through Raymond James Financial Services Advisors, Inc. Investing involves risk, and investors may incur a profit or a loss. Some expressions of opinion reflect the judgment of Raymond James and are subject to change. There is no assurance that any of the forecasts mentioned will occur. Economic and market conditions are subject to change.  Some of the material was prepared by Raymond James for use by its advisors.

We are happy to announce Confluence Financial Partners has been named as one of Pittsburgh’s Best Places to Work by The Pittsburgh Business Times.

Click Here to see article: Best Places to Work!

The 2019 Best Places to Work in Western Pennsylvania honors the region’s most outstanding workplaces. Winners are selected based on an online employee survey in June of this year and are honored at an event and in a special section of the paper. You must have at least 10 employees working in western Pennsylvania to participate. (Anyone with 5 percent or more ownership in the company may not participate in the survey and does not count toward the final employee total.) Companies do not have to be based in western Pennsylvania. Only employees working in the region are included in the survey and results.

Confluence Financial Partners is pleased to announce the hiring of Loren Paul Fiffik. He will serve as Wealth Manager working out of our Pittsburgh location. Loren is a Certified Financial Planner (TM) and comes to us from PNC Investments.

Click here to find out more information about Loren. https://www.confluencefp.com/team/loren-paul-fiffik-cfp/

We are pleased to announce the hiring of Nathan R. Garcia. He will serve as Wealth Manager working out of our Pittsburgh location. Nathan comes to us from PNC Investments with 18 years of experience in the financial services industry.

Click here to find out more information about Nathan. https://www.confluencefp.com/team/nathan-r-garcia/

Neil Rongaus, Wealth Manager for Confluence Financial Partners of Southpointe, grew up in Donora, PA where he attended Catholic School through fifth grade and continued his middle and high school education in the Ringgold School District. In 1997, he earned his degree in Finance from Duquesne University. Rongaus now resides in Carroll Township with his wife Marijo; son Marco (8); and daughter Remi (5).

Continue reading the article featured in this months Inside Washington County Magazine.  Inside Washington County