“What will happen to my stock?”
“How will the payout affect my taxes?”
“Will the Bengals’ stadium name change?”
Paychex’s $4.1 billion acquisition of Paycor brings big questions and marks a pivotal moment for shareholders and employees alike. According to the deal, shareholders will see their shares purchased at $22.50 each, a 19% premium over Paycor's 30-day volume weighted average stock price as of 1/3/2025. With the acquisition expected to close in the first half of 2025, now is the time to evaluate how this buyout impacts your financial goals as a Paycor shareholder, and how it might impact your financial goals as a Paycor employee, especially if some of your compensation has been stock-based.
Here are some thingsPaycor employees with stock need to know and how we can help.
Next Steps for Paycor Employees
If you’re a Paycor employee with stock, here are five key considerations as this acquisition is executed.
1. Calculate Your Cash Payout
Understanding the value of your stock payout is the first step in planning for this transition. All Paycor shares will be sold at $22.50 per share, and for employees with stock-based compensation, this payout will depend on the type of shares you hold.
For employees who purchased shares through an ESPP or hold stock options, all vested shares will be sold at the acquisition price. If you have Restricted Stock Units (RSUs), the terms of your RSU agreement will determine whether your unvested shares vest as part of the acquisition or are forfeited.
Example: Estimating Your Payout
Let’s say you currently hold 1,000 shares of Paycor stock purchased through an ESPP at an average cost of $18 per share. In addition, you have 500 RSUs, with 250 vested and 250 unvested. Here’s how your payout would be calculated:
- Your 1,000 ESPP shares will be sold at $22.50 each, giving you a payout of $22,500.
- Your 250 vested RSUs will also be sold at $22.50 each, resulting in an additional $5,625.
- Your 250 unvested RSUs may either vest as part of the acquisition or be forfeited, depending on your RSU agreement. If they vest, they’ll be treated as taxable income.
Under this example, you would receive $28,125 of share value. The tax impact will depend on your cost basis in your ESPP shares and whether you're realizing a gain or a loss. The value of the RSUs will be taxed at your federal tax rate, but taxes may be withheld at the time of vesting.
If you would like help assessing the tax impact of your shares being sold, we would be happy to speak with you. Schedule a complimentary and no-obligation consultation with our team by clicking here.
2. Factor Your Paycor Stock Sale Into Your Tax Plan
The sale of your Paycor stock at $22.50 per share is a taxable event, and the impact on your 2025 tax return depends on whether you’re selling at a gain or a loss. Planning ahead can help you manage your tax liability and avoid surprises when you file in 2026.
If your cost basis is below $22.50, you’ll realize a capital gain. Your tax rate depends on how long you’ve held the shares:
- Less than a year? The gain is taxed as short-term capital gains at your ordinary income tax rate.
- More than a year? The gain qualifies for long-term capital gains tax rates—0%, 15%, or 20%, depending on your taxable income.
For high-income earners, the Net Investment Income Tax (NIIT) of 3.8% may also apply, and state taxes could further impact your final amount.
If your cost basis is above $22.50, you’ll realize a capital loss. This loss can be used to:
- Offset capital gains from other investments.
- Reduce ordinary income by up to $3,000 per year ($1,500 for individuals or married filing separately).
- Carry forward any excess loss to future tax years, helping reduce future taxable income.
Example: How This Impacts Your Tax Plan
Let’s say you originally purchased 500 shares of Paycor stock at $25 per share, meaning your cost basis is $12,500. Now that your shares are being sold at $22.50 per share, you will receive $11,250 in total proceeds, resulting in a $1,250 capital loss.
If you also had $1,250 in capital gains from other investments, your Paycor loss could fully offset those gains, reducing your taxable income for 2024. If you had no other capital gains, you could deduct $1,250 against your ordinary income—potentially lowering your tax bill. If you had a $5,000 total capital loss, but no capital gains to offset, you could deduct $3,000 in 2024 and carry the remaining $2,000 into future tax years to offset future gains.
3. Review Your New Benefits
As Paycor’s benefits transition to Paychex, it’s time to reevaluate your retirement plan contributions, investment options, and insurance coverage. Aligning these with your financial plan can help you make the most of what’s available.
401(k) and Retirement Plan Changes
One of the most significant shifts could be the transition from Paycor’s retirement plan to Paychex’s. Here are a few key areas to review.
- Employer Match: Will Paychex offer the same matching contributions, or will their policy differ? Maximizing your contributions to take full advantage of any available match is crucial and will help you maximize your savings.
- Investment Options: Your fund lineup may change, which could affect your asset allocation and fees that you pay. Compare available investment choices and ensure they align with your risk tolerance and time horizon.
- Rollover Considerations: If you leave Paychex after the acquisition, you may have the option to roll your 401(k) into an IRA, which could provide broader investment options and more control over your retirement savings.
4. Look at Your Larger Financial Picture
Your Paycor stock payout is a great opportunity to reassess your broader financial strategy because what you do with this payout can shape your long-term wealth.
One important consideration is how to reinvest your proceeds. Rather than letting this payout sit in a low-interest account, you may want to allocate it into a diversified portfolio that aligns with your financial goals and risk tolerance. If you anticipate a sizable tax bill from the sale, setting aside cash now can help prevent financial strain when tax season arrives. In addition, if you anticipate a significant increase your taxable income in 2025, you might consider tax reduction strategies like contributing the maximum to tax-deferred retirement accounts, fully participating in Health Savings Account contributions, or–if you're charitably inclined and can itemize deductions–increasing gifts to the charities you support.
A proactive approach today can strengthen your financial foundation and build toward the future you want.
How Wealthquest Can Help
Many advisors can help you understand what your buyout will look like and assess your tax liability. But at Wealthquest, we can take it a step further. Our in-house tax department, financial planning team, and investment management team work together to create a fully integrated plan tailored to your goals.
With our integrated, “All Under One Roof” approach, our in-house tax, investment, and financial planners coordinate their guidance with each other seeking to serve your best interest. Here are just a few examples of how our team could assist you.
- Analyze your stock compensation to calculate your buyout and estimate tax implications.
- Develop potential strategies to reduce your tax burden and maximize your payout.
- Guide you through changes to your benefits and how they fit into your overall financial plan.
- Help ensure your saving and investing strategies align with your overall financial goals.
We seek to be proactive, thoughtful, and strategic, taking the time to understand your unique situation so every decision can support your financial success.
Let Wealthquest Help You Navigate This Transition
The Paychex acquisition of Paycor is a moment of change and a chance to take control of your financial future. At Wealthquest, we may not be able to predict the likelihood of the Bengal’s stadium name changing, but we are able to help you navigate this transition with confidence and clarity.
The earlier you start planning, the more options you may have. Schedule a free, no-obligation consultation with our team, and let’s create an integrated plan that works for you.
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.
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