Employee Stock Purchase Plans (ESPPs) are one of our favorite employee benefits. They help you accumulate shares of the company you work for at a discount and can help kickstart your financial goals. 

So what happens to your ESPP shares if you decide to quit or work somewhere else?

The purpose of this article is to dive into that exact question. There are a few misconceptions that stem from what happens to other forms of equity when you quit, so we’ll clear those up as well.

Purchased ESPP Shares Stay Yours When You Quit

If you’re familiar with the basics of ESPPs, you know that during your ESPP purchase period you will save cash from each paycheck, to eventually go toward the purchase of company stock at the end of the purchase period. 

At the end of the purchase period if you do in fact purchase shares, those shares officially become yours and will stay yours when you quit. Plain and simple.

Vesting Schedules Do Not Effect ESPP Shares When You Quit

Unlike other forms of equity compensation like Restricted Stock Units (RSUs) or even your 401(k) match, the shares you purchase through an ESPP are not subject to any sort of vesting requirements that say you need to stay at the company for X number of years.

It’s common for RSUs and the matched portion of your 401(k) contributions to be subject to a 4-year vesting schedule. So if you quit before the requisite time has passed, you’ll forfeit some RSUs or 401(k) money.

These vesting schedules have no impact on your purchased ESPP shares.

Knowing this is important because it could tip the scale for you on whether or not you want to participate in your company’s ESPP. 

Qualifying Disposition Requirements Don’t Affect Your Ownership

Another misconception we’ve heard is that ESPP shares can only be sold two years after you receive them. This misconception stems from ESPP Qualifying Dispositions, which have a two year holding requirement to then receive potentially better tax treatment.

Whether you choose to go for a Qualifying Disposition or a Disqualifying Disposition, your ownership will remain the same.

If you purchase shares through the ESPP, they are yours until you decide to sell them.

What Happens if You Quit Midway Through the Purchase Period?

If you decide to quit midway through your ESPP’s purchase period, there are a couple of ways that this can play out.

The most common way that companies choose to handle this scenario is by disenrolling participants who quit immediately and refunding them whatever funds have been set aside for share purchases at the end of the purchase period. Depending on the ESPP and what your current lock-in price is, it can sometimes make financial sense to hold off on quitting until you make one last purchase through the ESPP.

In rare circumstances, some companies allow you to make use of what you’ve contributed to the ESPP, but will not let you contribute anymore after the date you quit. This is actually a nice benefit, but it’s of almost no benefit to the company so it’s not very common.

Final Thoughts on Quitting with ESPP Shares

If you decide to quit working for a company, there’s usually a pretty good reason. Because you won’t have to forfeit ESPP shares you’ve purchased when you quit, you’ll want to evaluate if your shares are still worth holding on to if you haven’t already sold them.

It’s also worth doing the math on whether or not it’s worth it to stick around until you’ve purchased ESPP shares in the current purchase period. Nvidia’s ESPP has a 24-month offering period and has made participants wealth. If you work here or at another company will a stellar ESPP, it’s worth running the math on how much value you’d be leaving on the table if you cut your ESPP contributions short.