An employee with stock options left the company. Does the length of their post-termination exercise window affect our 409A valuation, or is that just their problem?

Two separate things are getting mixed together here, so let's split them.

The exercise window itself is mostly the employee's problem. Standard option plans give departing employees 90 days (sometimes longer) to exercise vested options before they're forfeited. Whether they exercise in that window is a decision about their own money and tax situation — it doesn't change your company's fair market value (FMV) or require you to touch your 409A.

Where it becomes your problem: if you modify the window. If you (or your board) decide to extend a former employee's exercise period — say from 90 days to a year, which is increasingly common as a retention-friendly gesture — that's treated as a modification of the option grant under Section 409A, not a non-event. A modification that extends the exercise period beyond certain limits can be treated as a new grant for tax purposes, and that new grant needs to be priced at current FMV. If your last 409A is stale (more than 12 months old, or a funding round happened since), you may need a fresh valuation to price that extension defensibly. Extending the window also commonly converts an incentive stock option (ISO) into a nonqualified option, which is a real tax consequence for the employee, but that conversion itself doesn't require you to re-run a valuation.

What actually triggers a new 409A here: not the departure of one engineer by itself, unless that departure is significant enough to be a material event affecting company value (think: a co-founder or key technical lead whose exit changes your risk profile or product roadmap materially). A single individual contributor leaving, with a standard exercise window, is not a trigger.

So: leave the window alone, no action needed on your end. Extend it, and check whether your current 409A still covers the new pricing — if not, that's when you need a current valuation on file, and it's worth a quick check with counsel before you formalize the extension.