A 10b5-1 plan for executives lets a director or officer sell company stock on a schedule set in advance, and Edward Jones Investments sizes that schedule from household spending needs before tax timing. Directors and officers must wait through a cooling-off period before the first plan sale. That period is the later of 90 days after adoption or 2 business days after the 10-Q or 10-K for the quarter of adoption, capped at 120 days. Other designated insiders wait 30 days.
If you do nothing, the blackout calendar keeps deciding for you. You sell only in short open windows, often right after earnings, whatever your cash needs or your tax bracket look like that month. A bill that lands in a closed window gets paid from savings, and the concentrated position stays exactly as large as it was.
The plan itself is a legal tool, and it lowers no tax. Taxes come from which lots you sell, how long you held them, and which tax year the gain lands in. Those choices get written into the plan, and changing them later restarts the clock.
Edward Jones Investments wrote this for tech employees with stock options, RSUs and an employee stock purchase plan. It follows one hypothetical insider, Fatima, through the rule, the schedule and the tax math. It is general education, not legal or tax advice.
By Elena Rodriguez, CFA — Portfolio Manager | Reviewed by Aisha Bello, CFPElena manages fixed-income and equity ladders for clients approaching retirement, focusing on sequence-of-returns risk.
Before we put a dollar figure in a plan, we list the bills due in the next 24 months. A plan that can't cover a bill due inside the cooling-off period isn't doing its job.
Senior Financial Planner, Edward Jones Investments
First-in, first-out is the broker's default, and on a $100,000 sale it can cost $10,500 more tax than choosing high-basis lots. Write the lots into the plan before you sign.
CPA and Tax Director, Edward Jones Investments
Holding for long-term treatment only affects tax on growth after the vest. Compare that small saving to the loss if the stock drops 30%.
CFP® and Lead Advisor, Edward Jones Investments
Who waits 30 days and who waits up to 120?
Section 16 officers and directors wait the later of 90 days after adoption or 2 business days after the 10-Q or 10-K for the quarter of adoption, never more than 120 days. Other employees, including designated insiders below officer level, wait 30 days. The issuer itself has no cooling-off period.
Fatima (hypothetical), 34, is a staff data scientist who just moved from a late-stage private software company to a public one. Her forecasting work gives her early sight of results, so she is a designated insider but not an officer, and her wait is 30 days.
Your status is decided by your company's insider trading policy, which names designated insiders. Ask the general counsel's office to confirm yours in writing. Officer status follows the SEC definition of officer, not your job title, so a VP title alone doesn't make someone a Section 16 officer. And a staff-level employee can be a designated insider because of what they see.
Placing yourself
Getting status confirmed
Read the rule itself, not the hallway paraphrase
The hallway version says a plan makes your trades legal. The rule says something narrower: Rule 10b5-1 gives an affirmative defense to insider-trading liability, and only for trades made under a plan you adopted while you were not aware of material nonpublic information. You also have to adopt it in good faith and keep operating it in good faith. Pressuring the company over the timing of announcements, or cancelling a plan right before bad news, can undo the defense even when the paperwork was clean.
A change to a plan's amount, price or timing counts as ending the old plan and adopting a new one, and a new cooling-off period starts. People who say they'll just tweak it later usually don't know that. Directors and officers must also state in the plan document that they are not aware of material nonpublic information and that they are entering the plan in good faith. Other insiders don't sign that certification.
What the defense covers
Why changes restart the clock
What changed for a 10b5-1 plan signed before 2023?
The SEC adopted amendments in late 2022, in force since February 2023. They added cooling-off periods, generally barred overlapping plans, limited single-trade plans to 1 in any 12-month period and added the officer certification. They also added a Form 4 checkbox for plan trades and quarterly company disclosure of officer and director plan adoptions and terminations.
An older plan can keep running, but any change to amount, price or timing now puts it under the current rules, new cooling-off period included. Treat a pre-2023 plan as frozen: amend it only if you can live with the wait.
Build Fatima's first sale schedule from cash needs, then taxes
Fatima (hypothetical, round numbers) pays a $40,000 ISO exercise out of the family's cash reserve, and the baby arrives in about 5 months. Her husband is an ER nurse, and parental leave will trim income. Before Edward Jones Investments suggests any sale amount, it writes the dated expenses into a short playbook: rebuilding the $40,000 reserve and covering the months of leave. Only then does it look at what the schedule does to the tax return. That order reflects our view that the spending plan, not a risk questionnaire, sets how much the portfolio can afford to lose.
Her RSUs vest at $30,000 per quarter. Assuming 35% goes to taxes, $30,000 × 0.65 leaves $19,500 of shares. A plan that sells at each vest puts $19,500 in the bank per quarter, so $39,000 after 2 vests. Her basis is the vest price, so the sale creates almost no capital gain.
Holding each tranche 12 months changes tax only on later growth. Say, for illustration, the $19,500 grows 10%: that's $1,950. A 20-point gap between short-term and long-term rates on it is worth $390. Against that, a 30% drop on $39,000 costs $11,700, thirty times the tax saved. Run the same comparison with your own vest amounts and bracket before you pick a holding rule.
She still has to choose: sell at vest or hold each tranche for long-term treatment. The baby arriving before the second vest tips it toward selling at vest, because the reserve needs refilling first. So does the paper spread of about $300,000 in illiquid ISO shares from the old employer, which already ties a lot of the family's wealth to one sector. Stock sold on a schedule or kept can fall in value, and she could get back less than she originally invested. How fast to diversify depends on what share of the family's wealth should sit in her employer's stock, a question we treat on its own page.
Cash needs first
The vest-or-hold math
Never count on a new plan to pay a bill due sooner than its cooling-off period. If you're a director or officer and the bill is due within 120 days of signing, or a designated insider and it's due within 30 days, pay it from cash or an open-window sale.
| Plan feature | Before amendments | Fatima now (non-officer) | If named an officer |
|---|---|---|---|
| Cooling-off period | None in the rule | 30 days | 90 to 120 days |
| Single-trade plans | No limit | 1 per 12 months | 1 per 12 months |
| Overlapping plans | Commonly used | Generally barred | Generally barred |
| No-MNPI certification | Not required | Not required | Required in plan |
| Form 4 plan checkbox | Did not exist | Not a Form 4 filer | Checked on each sale |
Does a joint return or an early exit change which plan sales cost less tax?
Yes. On a married-filing-jointly return, your spouse's wages stack under your gains, and a planned early exit can open a low-income year, so both change which sales cost less tax. First separate saving tax from moving it. Choosing high-basis lots, holding a lot past 1 year from vest and spreading gains over 2 tax years can cut the bill. Pushing a December sale into January only moves the same tax 12 months later.
Fatima's nurse husband earns wages that sit under her gains. A schedule that looks modest for a single filer can still push the couple's gains into a higher capital-gains rate. Have the CPA run both spouses' projected wages before you fix dollar amounts.
For a large stake or a planned early exit, sales can be scheduled into the first low-income year after the paychecks stop, which genuinely lowers the rate on those gains. A small holding rarely justifies that complexity. Gifting shares to charity is another route, described on our donating appreciated stock page.
Saving versus shifting
Stacking on a joint return
Name the lots in the plan instructions
Two small errors tend to come together. The first is leaving lot selection to the broker's first-in, first-out default, which sells the oldest, lowest-basis shares. On a $100,000 sale (for illustration), FIFO might pick shares with a $20,000 basis, an $80,000 gain, against $10,000 of gain from chosen lots with a $90,000 basis. At an assumed 15% rate that's $12,000 of tax against $1,500, so $10,500 extra. The second is amending the plan to fix it, which for an officer restarts a cooling-off of up to 120 days and can skip a full quarterly sale. Together they cost $10,500 of tax plus a missed quarter of diversification. Put specific-lot or highest-basis-first instructions in before you sign.
First moves for a director, officer or designated insider, in order
Do these in order, and don't skip ahead to drafting. Each answer is an input to the one after it, and the plan is hard to change once signed.
Start with your insider status and the open-window dates, in writing. Then list the dated cash needs for the next 24 months, and pull a lot-level cost basis report from the stock plan account. Draft the plan with counsel and the broker during an open window, with dollar amounts by tax year and lot instructions. Last, put the end of the cooling-off period on the calendar, along with Form 4 due dates: 2 business days after each sale for Section 16 filers.
Spouses' wages and any other income for the year go to your CPA before the amounts are final. The IRS reports these sales on Form 8949, so keep the lot records the plan will use.
Before the window
Once the plan is signed
Which parts of a 10b5-1 plan you can handle alone, and what to bring to Edward Jones Investments
You can confirm your insider status, collect your lot report and list your dated expenses yourself. Legal drafting belongs with your company's counsel and the broker. The sale amounts, the lot order and the choice between selling at vest and holding are worth a conversation with Edward Jones Investments, because those choices decide how much the portfolio can afford to lose before the next bill comes due. A plan lowers no tax by itself and gives no protection if you adopted it while aware of material nonpublic information. If company stock is a small slice of your savings, or you trade freely in open windows, the fixed schedule may not be worth it.
A 10b5-1 plan lowers no tax by itself; the lots you name and the dates you pick do that.
What people ask about 10b5-1 plan for executives
What happens if my company announces a special blackout while my 10b5-1 plan is set to sell?
A properly adopted plan keeps selling on its schedule through a blackout, because the trades were fixed before you had inside information. That is the point of the affirmative defense. Cancelling or pausing the plan around the blackout can damage that defense, so talk to company counsel first.
How long after an earnings report can an officer's first 10b5-1 plan sale happen?
For a director or officer, the first sale comes after the later of 90 days from adoption or 2 business days after the 10-Q or 10-K for the quarter of adoption, capped at 120 days. Adopting right after an earnings report usually means a wait near 90 days.
Can a 10b5-1 plan sell my RSUs on the day they vest if I'm a designated insider?
Yes, once your 30-day cooling-off period has ended, a plan can sell on each vest date. Because your basis is the vest price, the sale creates almost no capital gain. Taxes withheld at vest are separate, so check how much the company already withholds.
Do 10b5-1 plan sales scheduled in January instead of December save tax or only delay it?
Moving a sale from December to January usually only delays the same tax by 12 months. It saves money only if the January year has a lower rate or the shares cross the 1-year holding mark first. Check both years' projected income with your CPA.
Who drafts a 10b5-1 plan: the company's broker, my own lawyer or the general counsel?
Usually the plan is drafted by your own securities lawyer or company counsel, and the broker administers it. The general counsel's office typically has to approve it under the insider trading policy. An advisor can supply sale amounts and lot instructions but not legal drafting.
Official references
This material is general information only and does not address any individual's investment, tax or legal situation. Investing involves risk, including possible loss of principal. Before acting on any information here, speak with a financial advisor, tax professional or attorney about your circumstances.