Retirement Accounts Flashcards
Employee benefit plans include public and private _____ whether or not qualified under ERISA.
retirement
pension
annuity
savings
profit sharing
stock bonus
stock option
thrift
vacation pay
and similar plans of deferred or fringe benefit compensation
Fam. Code 80
Pension rights, whether vested or non-vested, ______ and are subject to property division.
are NOT mere expectancies
Marriage of Brown (1976) 15 Cal.3d 838
Retirement benefits attributable to ______ are CP. This is based upon when it is _____. Even if received after DOS or unvested at DOS, there is still CP.
service rendered during a marriage
EARNED not when it is received
Marriage of Green (2013) 56 Cal.4th 1130
Post-DOS opportunity to realize income from ____ should be disclosed on PDDs.
CP options
Fam. Code 2102(a)(2)
Failure to disclose insider information when barred from doing so under securities law is _____.
NOT a basis for an alternate valuation date
Marriage of Reuling (1994) 23 Cal.App.4th 1428
Allows officers and directors of public companies to trade using a ______ per a written plan on a specified date, regardless of the stock price on that date OR grant a third party to the authority to make the sale within a designated period.
pre-planned sale of stock
Rule 10b-5
The benefit plans can be _____ when either party claims an interest.
joined
Fam. Code 2060
Every request for joinder of employee benefit plan must be submitted using _____.
FL 372 (request for joinder of benefit plan)
FL 370 (pleading on joinder benefit plan)
FL 375 (summons), and
blank FL 374 (notice and response)
CRC 5.29
The right to buy a number of shares for a particular price by a certain date.
Stock options
When the employer gave the options to the employee
Grant Date
When the employee can buy the options
Vesting Date
The date the options are purchased
Exercise Date
Options granted but work must still be performed to vest
Unvested
Vested but have not been used to purchase the stock
Unexercised
There is still time to purchase the shares per the contract
Unexpired
Companies may prohibit stock trades during certain periods around key events, prohibit employees from capitalizing on MNPI, and avoid the appearance of insider trading.
Blackout
Plans that are “statutory” or “qualified” plans which generally have better tax treatment under _____
IRC 421 and 422.
Incentive Stock Option
No “income” for tax purposes shall result at the time of the transfer to the individual upon his/her exercise of the option IF had stock _____. The exercise must occur ____.
(1) one year after the exercise date AND (2) years after the grant date
during employment or within 3 months of leaving the company
IRC 422
Transfer to a non-employee spouse in connection with a divorce _____ an option as an ISO.
disqualifies
The non-employee spouse will be taxed on the ____ while the employee ____ taxed on the benefits paid to the former spouse.
amount received
is not
Rev. Rule 2002-22 & 2004-60
Stock options may not have value if _____ is higher than the trading price.
the strike price
Even if the employee purchases the stock at the strike price, it may still be subject to _____ if the employment ends.
forfeiture
Where a spouse must continue to work after DOS for a period of time to allow vesting, the court should apportion benefits based upon pre-DOS and post-DOS time worked to vest.
Apportionment
The court may accept any reasonable method of apportionment if it is ______.
representative of the CP and SP contributions
Marriage of Sonne (2010) 48 Cal.4th 118
Common Methods of Apportionment
(1) Time Rule;
(2) Modified Time Rule; and
(3) Cash + Service Contributed
Time Rule
(Time benefit accrued between DOM and DOS) / (Total time benefit accrued)
When the employer _____ with an option contract, apportionment of unvested stock options (at DOS) involves the period from the date of grant to the date the benefit vests i.e. CP would be date of granting to date of separation and SP would be date of separation to date of exercise.
incentivizes future performance
Marriage of Nelson (1986) 177 Cal.App.3d 150
When the employer _____ with an option contract, apportionment of unvested stock options (at DOS) involves the period from the date of hire to the date of vesting.
incentivizes new hires or past performance
Marriage of Hug (1984) 154 Cal.App.3d 781
When stock is restricted by a _____, apportionment is the date of grant until the date of forfeiture expires.
forfeiture period
Marriage of Harrison (1986) 179 Cal.App.3d 1216
IRC 1041 only applies to _____ who redeem stocks. The _____ who redeems stock through the corp. would not qualify under 1041.
owner spouses
non-owner/employee spouse
Reg. 1.1041-2
The right to receive shares of stock after continued employment. They generally vest in yearly “tranches” i.e. 100k in 2019, 100k in 2020, 100k in 2021
Restricted Stock Units (RSUs)
Allocated to the party receiving the benefit.
RSU taxes
Allows for taxation on the value of the RSU at the ____ rather than waiting for ___. It generally creates substantial tax savings.
grant date
vesting
Section 83(b) election
A portion of current wages are deferred to the future (taxes not paid until actually receiving the funds).
Deferred Compensation Plans
The court shall make whatever orders are necessary to ensure that each party receives his/he full community share in any retirement plan, including _____.
survivor and/or death benefits
Fam. Code 2610
Generally require QDRO for in-kind division
ERISA plans
Pension, Annuity, etc. to be paid out in monthly payments upon retirement.
Defined Benefit
401k, 457, etc. to be divided in lump sum
Defined Contribution
Do not require QDRO for in-kind division
Non-ERISA
Similar to defined contribution but NOT subject to ERISA
IRA
Alternate payee subject to a QDRO may receive money from a qualified plan without ______.
having to pay the 10% tax penalty
IRC 71(t)2(c)
Alternate payee avoids 20% income tax when there is a ______
direct transfer of a lump sum distribution to another retirement plan (i.e. IRA) with no payment going to the alternate payee.
IRC 401(a)(31)
Non-employee spouse may elect to take an immediate distribution of his or her CP share of vested retirement benefits even if the ______. However, non-employee spouse may be giving up ____.
employee spouse elects not to retire at the earliest retirement age
increased payments in the future which may accrue due to increased age, longer service and a higher salary
Marriage of Gillmore (1981) 29 Cal.3d 418
The state court, under the Retirement Equity Act (REA) of 1984, has jurisdiction to QDRO retirement accounts and the plan administrators are bound even if ____.
not joined to the case
Marriage of Baker (1988) 204 Cal.App.3d 206
Parties cannot unilaterally _____ to transmute otherwise CP into SP where purpose was to replace _____.
“elect” disability pension
retirement pension but at a higher amount
Marriage of Stenquist I (1978) 21 Cal.3d 779
Recognizes military retirement benefits ____ and a state court may divide them pursuant to state law BUT cannot exceed ______.
as marital property
½ and must have been in the military for at least 10 years DURING the marriage
Uniformed Services Former Spouses’ Protection Act (USFSPA) 1982
The court may address ____ from a judgment and retains jurisdiction as an omitted asset.
unmentioned military retirement accounts
Marriage of Henn (1980) 26 Cal.3d 323
The Supreme Court determined that _____ regarding division of military benefits. This is the case that caused USFSPA to be passed the following year.
federal law preempted state law
McCarty v. McCarty (1981) 453 U.S. 210
