His Employer Goes Public at a $35 Billion Valuation. Medicare Can Count the Stock When It Vests, Even If He Never Sells a Share
When a private company goes public and years of restricted stock units vest overnight, an executive who sells nothing and receives no cash can still face a tax bill and a Medicare premium spike that arrives two years later with…
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A 66-year-old executive has spent eight years collecting restricted stock units (RSUs) at a private company. This fall the company lists at a $35 billion valuation, and years of built-up units vest when the IPO closes, meaning his shares officially become his. He sells nothing. A lockup agreement bars him from selling, so no sale proceeds hit his account. His W-2 looks very different, and Medicare reads that income two years later.
Only about 8% of Part B enrollees pay the income-related surcharge known as IRMAA, and in 2026 it starts above $109,000 for individuals and $218,000 for joint filers. A retiree with no equity pay and income well below those lines can relax. An executive sitting on unvested units at a company headed for a listing has a problem worth mapping now.
Vesting Day Sets the Tax Bill
RSUs usually create no tax when they are granted. When the units vest and the shares are delivered, their fair market value generally lands on your W-2 as taxable wages. The sale date does not control the timing; the vesting and delivery do.
Private companies often grant double-trigger RSUs, which require both time-based vesting and a liquidity event such as an IPO. That structure packs years of time-vested units into one tax year. That taxable value generally becomes his cost basis, so if the stock drops during the lockup, he still owes tax on the higher value recognized when the shares vested.
One Vest Can Push a Couple Up Four IRMAA Tiers
For IRMAA, modified adjusted gross income (MAGI) means AGI with tax-exempt interest included. Municipal bond income that feels tax-free still counts. Take an example married couple with $250,000 of salary and other income. Under the 2026 schedule, they fall into the lowest bracket and each pay a Part B charge of $81.20 a month. Add a $600,000 vest and their MAGI hits $850,000, which lands them in the top tier.
| 2026 Tier (Joint MAGI) | Part B Surcharge, Per Person, Monthly | Total Part B Premium, Per Person, Monthly |
|---|---|---|
| Over $218,000 up to $274,000 | $81.20 | $284.10 |
| $750,000 or more | $487.00 | $689.90 |
For the couple, the annual Part B IRMAA surcharge rises from $1,948.80 to $11,688, an extra $9,739.20 in one year from shares they never sold. Part D IRMAA stacks on top, rising from $14.50 a month per person in the lowest bracket to $91 in the top tier.
IRMAA looks back two years, so a 2026 vest sets 2028 premiums. The 2026 schedule came out on November 14, 2025, so treat these brackets as a yardstick until the 2028 figures arrive in late 2027.
Taxes and Premiums Arrive Before Any Cash
RSU withholding often uses the 22% supplemental-wage rate, while supplemental wages above $1 million are withheld at 37%. If his actual tax bill runs higher, he can still owe more. Then the 2028 premium increase hits. He can owe tax and higher Medicare premiums without receiving equivalent cash from a stock sale.
SSA-44 Will Not Undo a Vest
Social Security lets enrollees request a lower IRMAA after certain life-changing events, including marriage, divorce, the death of a spouse, stopping or reducing work, and some losses of income. A vest that raised income does not qualify. Retirement can help: work stoppage counts as a qualifying event, so an executive who retires after the IPO can ask Social Security to use lower post-retirement income if the job loss actually brings his MAGI down.
Couples should also plan for the survivor trap. A widowed spouse files single, where the first threshold is $109,000 instead of $218,000, so the same household income can trigger a higher tier. (Several Medicare charge catch retirees off guard, and we mapped the rest in a free guide here.)
What to Check Before the Shares Vest
- Get the number in writing. Pull your vest dates and expected W-2 income, including any portion the IPO triggers, and compare them against the IRMAA thresholds for the premium year that income will set. In a vest year, skip optional income like a Roth conversion, because every extra dollar lands in a tier you are already pressing.
- Fund the gap early. Check whether the withholding will cover the tax bill and whether an estimated payment is due before April. Keep cash set aside for the 2028 Medicare premium increase too.
- Time retirement carefully. If you plan to stop working within a year of the vest, file Form SSA-44 once you do, and attach your employer’s letter confirming your last day of work.
For Medicare, the date that matters may be neither the IPO nor the sale. It can be the day the shares vest.
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Gerelyn Terzo is the author of dividend investing handbook "Dividend Investing Strategies: How to Have Your Cake & Eat It Too." A veteran financial journalist, she covers agri-finance for outlets like Global AgInvesting and the broader stock market and personal finance for 24/7 Wall Street. She began at CNBC and later helped launch Fox Business in New York. Gerelyn currently resides in Woodland Park, Colorado and dabbles in nature photography as a hobby.
