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need help learning choices for division of ESOP


Guest fancynancy

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Guest fancynancy

I am new here but have read dozens of posts and realize that you guys are really knowledgeable and generous with your help. And I really need help.

I went through a nasty divorce, and 4 years later am still trying to finish the settlement. My Ex works for a huge publicly traded global company. Ex and the Plan Administrator have been friends for over 20 years. I cannot get a full and straight answer from the PA as to what my choices are to get my 50% (awarded by the court) of the employee stock options in the account. Every time I try, the PA contacts my Ex and then feeds me Ex's version of what he wants me to know. I finally went back to court and got a Court Order for Ex to authorize the company to give me the full information, but it is still being filtered by the PA.

I did finally get to see the account statements and have learned (after the Court Order) that in these 4 years, Ex has exercised and sold some of the stock. This situation of some sold shares and some unexercised Options probably has complicated the decisions on how to divide the account assets.

The only condition in the divorce decree is that the asset is to be settled in a way to cause the least tax liability to each of us. He is in a very high tax bracket and has to consider AMT. I am on SS and in such a low bracket that I owed no taxes the last 3 years.

How can I learn if the employer's Plan allows for Options to be transferred to me (and exercised at my own tax level) or what other choices I have in this asset division?

Thank you for any and all help.

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To get the ball rolling, request (in writing) a copy of the ESOP's QDRO procedures, and find an attorney who understands QDRO's to prepare one for you.

A QDRO is a qualified domestic relations order. It specifies to the ESOP what portion of your ex's account you get, based on the divorce decree. It also contains certain other information that may or may not be in the divorce decree. This should be described in the ESOP's QDRO procedure.

It starts as a DRO (domestic relations order), which your attorney can draw up. After the divorce judge signs the DRO, you or your attorney submit the DRO to the ESOP. The ESOP's plan administrator determines if it is "qualified," which generally means that it contains all the necessary information and does not require the ESOP to do something that the ESOP could not otherwise do, such as, requiring a form of benefit distribution that is not available to ESOP participants. If the DRO is determined to be qualified, it is then a QDRO (qualified DRO), and you should be getting your share of the account. If the plan administrator determines that the DRO is not qualified, the plan administrator has to tell you why, and you then revise the DRO, get it signed by the judge, and resubmit it.

Sometimes QDRO's go very smoothly, and sometimes they hit bumps and snags, so stick with it. Good luck.

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Guest fancynancy

GMK, Thanks for your reply.

We did a QDRO to divide another employee account managed by a different brokerage company because it was a 401-K. This ESOP account is for grants/stock options awarded by the company. The assets are RSU, ISO and NQO Options, most were already vested and the remaining have vested in the years since the divorce. The RSU and ISO options are the ones that Ex sold (and kept the proceeds) already, the NQO options are still in the account. I am willing to go the QDRO path again, but I wonder does this kind of asset meet the requirement for a QDRO?

I didn't exactly understand the last QDRO and I don't think either attorney did either, but it was a simple 50/50 split of stock shares so the brokerage company just put half the shares in an account in my name. This account seems more complicated, so it would be great to know if a QDRO "does not require the ESOP to do something that the ESOP could not otherwise do, such as, requiring a form of benefit distribution that is not available to ESOP participants" before more legal effort/expense is undertaken. Is there a way to just get the employer to tell me in writing what all my choices are? Can I go to the supervisor of the PA or to the legal department of this huge ? Can I find it documented somewhere? Can I get someone else to inquire anonymously? I am accumulating significant legal fees just from the way this has dragged out, so I am trying to figure this out best I can on my own.

Most people would think this is not a lot of money, but my financial future is not that solid, so this is a lot of money to me. Again, thanks for any feedback and advice you can offer.

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Let's get something clear here. It sounds like fancynacy is NOT talking about an ESOP--- am I correct?. ESOP is an acronym stands for an Employee Stock OWNERSHIP Plan-- a type of qualified retirement plan. I think you are talking about a type of stock options plan which tend to be non-qualified plans. .

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Guest fancynancy

Yes, I guess you are right. The employer calls this account an ESOP but they mean Employee Stock Option Plan. The company awards/grants their company's stock as Options that vest over time and then the employee can exercise the Options [purchase Shares at the discounted Grant Price]. The spread between the Grant Price and the Market Share Price is the gain when the Options are sold.

The ISO Options have a tax advantage. The NQO Options are non-qualified and are treated more like ordinary income by the IRS.

Can you still help me understand what to do with this situation? Thank you.

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I can't help you. ESOPs in the retirement world are kind of a niche-- that I am good at. So if you don't get much useful response you might want to resubmit your questions under a different topic title.

Try misc benefits as the general topic.

Then in your subject line make it clear that you are talking about Stock Options and non-qualified stock option plans.

I believe there are experts that read this board regularly on those topics. They just might not be reading this thread thinking they don't know anything about ESOPs. Like I said on this board reference to an ESOP is always going to be assumed you are talking about the qualified retirement plan and not your subject.

Just so you know the guy that runs this board will not take offense if you resubmit your question under a more relevant topic heading.

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  • 4 weeks later...

Request a copy of the plan document from the plan administrator. Determine if the plan accepts DROs. Non-qualified benefits do not always accept DROs but if this option plan does then the plan document should provide you the details on what the order requires.

There is a good probability that you will have to engage in some enforcement action against your ex-spouse to recover what you were initially ordered. Your best option here is to talk to a divorce attorney.

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