RSUs and PSUs are a significant component of Walmart’s total compensation plan for executives, offering both regular and performance-based equity awards.
Understanding the timing of vesting, associated taxation, and planning strategies is essential for maximizing the value received from these awards and avoiding tax surprises.
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RSUs represent a promise to deliver shares of Walmart stock to an associate after certain conditions are met, usually based on continued employment.
Grants are typically awarded each spring and vest (unlock) monthly over three years, providing a predictable income stream of Walmart shares.
PSUs are awarded mainly to company officers and are linked to Walmart’s achievement of long-term performance goals.
PSUs typically have a three-year “cliff” vesting period: 100% of the shares vest at once after three years, provided performance targets are met.
New officers may receive accelerated PSU grants to bridge the period leading up to their first regular vesting event.
Vesting Triggers Taxable Income:
No taxes are due when RSUs or PSUs are granted. Taxes are triggered only when the shares vest and are delivered into your Fidelity account.
The market value of the vested shares is taxed as ordinary income, similar to your salary.
Example: If 30 shares vest at $100 each, $3,000 in income is reported and taxed at your marginal tax rate.
Capital Gains:
If you keep vested shares and later sell them for more than their value at vesting, the increase is taxed as capital gains.
Selling immediately upon vesting can simplify your tax outcome and reduce risk from holding a concentrated stock position.
Tax Withholding Pitfalls:
Walmart’s default tax withholding on RSUs and PSUs is 22% (up to $1 million), often lower than many associates’ or executives’ actual marginal rate.
This can result in a year-end tax bill or even an underpayment penalty for higher earners.
You can adjust your withholding on the Fidelity NetBenefits site or make quarterly estimated tax payments to the IRS to avoid surprises.
Use Equity Income to Maximize Retirement Savings:
By using cash proceeds from vested RSUs/PSUs for living expenses, you may be able to contribute more salary to your 401(k), Health Savings Account (HSA), or the Deferred Compensation Matching Plan (DCMP), boosting tax-advantaged savings.
Strategic deferrals and paycheck optimizations can reduce taxes and accelerate long-term wealth accumulation, with potential for six-figure lifetime tax savings for executives.
Diversification:
Avoid over-concentration in Walmart stock by selling shares soon after vesting and reallocating to a diversified portfolio.
This can help protect against company-specific risks while still benefiting from your equity compensation.
Understand your grant, vesting, and tax dates—review statements regularly to track upcoming events.
Adjust your tax withholding proactively as your compensation grows or changes.
Use the cash flow from stock awards thoughtfully as part of an integrated financial plan, maximizing the benefits of Walmart’s full suite of savings options.
Reach out to a qualified advisor or Walmart’s plan resources to review your equity plan and optimize your approach.
RSUs and PSUs are powerful wealth-building tools, but maximizing their benefit requires ongoing awareness and proactive planning.
Missing the fine print around taxes or not actively managing concentrated risk can reduce the long-term impact of these awards.
